MARCH 2014

Industry intelligence to nancial professionals www.cover.co.za

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 their existing processes and systems, or compromising their independence.
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 25 YEARS OF INDUSTRY INTELLIGENCE

CONTENTS
COVER MARCH 2014

08
MARCH 2014

Industry intelligence to nancial professionals www.cover.co.za

SHORT-TERM
Liabilities in manufacturing. 28
What your clients want from Short-term insurance 30
Insuring the wealthy 32
COVER has coffee with Ian Kirk 44

DATA
BIGys nge
challe
od
Everyb
ATION re
EDUC the futu
ing in
Invest
TICS
LEMA rs ESal
TothAersBitL
TE ew frontie
N

L L E C s a ste FINANCIAL PLANNING

& CO its art, fo r

ART For some

Landmark year for African equities? 31
Taking Takaful into Africa 68
Explaining JSE anomalies 74

ON THE COVER
OFC_portrait.indd 1 2014/03/10 6:23 PM

When you dont have the heart to work 75

5 Ways to unlock business profit 76
Selecting and Asset Manager 77
NEW FRONTIERS OF TELEMATICS 8 Visualise your company structure for the future 78
Like the early settlers who conquered the Wild West
in America, Telematics burst onto the scenes not so
long ago, transforming the landscape of insurance
forever. Innovation is the name of the game and
application of an overwhelming load of data is
changing this game even further. HEALTHCARE
Tips for your client 80
ART NEEDS PROTECTION 24 Employee wellness 81
The renewed interest in South African art, the global
move to art as an investment class and increased
professionalism of criminals in the art world have
shifted the focus to specialist insurance for art in
South Africa. COVER takes a look.

WORKING WITH WHEELS

SYSTEMS AND THE DATA CHALLENGE 36
As the insurance industry becomes more innovative Compulsory third party insurance 70
in the collection of data, the need to manage and The motor industry 71
effectively apply the data becomes essential. KPMG Curious case of sinking Corvettes 72
provides some insight into insurance systems and
optimization of data.

INVESTING IN THE FUTURE - EDUCATION 78

Everyone can invest in the future of a child, whether RISK MANAGEMENT
you are a parent, a family member or not. Sound advice
from a financial planner can facilitate any need with the Top 5 continuity risks 34
variety of vehicles and opportunities available. Make Risk Management actuaries for the tough stuff 35
a difference by sharing these opportunities with your
clients.

The views expressed in this magazine do not necessarily represent those of its
owners, publishers or editorial staff. Editorial contributions sent to COVER are
Subscription rate: R470 per annum in South Africa. subject to editorial change to suit the style of the magazine. All manuscripts,
Other rates on application. photographs and other similar matter are accepted on the understanding that no
loss or damage is borne by the publisher, the editor or their personnel.
2 COVER MARCH 2014

Mar 14.indd 2 2014/03/11 3:22 PM

 Tired of Drawing Straws ?

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 36 78

ASSOCIATIONS EDITOR
Tony van Niekerk
Actuarial Society Top student choose actuarial careers 86 tony@cover.co.za
FIA off to Australia 87
EDITORIAL
Annetjie van Wynegaard
annetjie@cover.co.za

Taryn Kerr
GOVERNANCE taryn@cover.co.za

ADVERTISING & MARKETING

Integrated thinking by directors essential 82
Hermione Ballinger
Pension Fund Adjudicator 84 hermione@cover.co.za

EDITORIAL, ADVERTISING & MARKETING

Thenjiwe Roda
thenjiwe@cover.co.za
TECHNOLOGY ADMIN & SUBS
Brent Munnik
Insurance systems and data 36 brent@cover.co.za
How technology shapes the future of insurance 40
Digitalisation puts the pressure on 42 LAYOUT & GRAPHIC DESIGN
Wesley Chipps
wesley@cover.co.za

Publisher
COVER Publications
AFRICA RISING
Street address
Russia and BRICS 46 80 Devilliers Way,
Glencairn, Cape Town
A round trip in BRICS 48
African expansion needs new models 49
Postal address
Zambia in the spotlight 50 P O Box 2030
Illicit Financial Flows in Africa 51 Sun Valley, 7985
Ghana and Kenya in figures 52
Telephone (083) 567-0757
Fax (086) 642 6263
E-mail: info@cover.co.za
Website: www.cover.co.za
REGULAR Images: 123rf.com; istockphoto.com
& shutterstock.com
Editorial 6
Events 88 Editorial Board
Market Cover 94 Peter Atkinson, Seamus Casserly,
Product Development 95 Mike Duncan, Ronald Gordon, Mark Haken,
Jonty Kirkman, Baravand Madhav,
People on the move 96 Rod Pearson, Colin Travers.

Advisory Committee
Carel Nolte, Viviene Pearson, Kalim Rajab

The Editorial Board serves in a voluntary and

independent advisory/technical capacity. Members do
not in any way represent their employer companies.

See our Facebook page

(www.facebook.com/COVERPublications)
and follow us on Twitter @covertony & @coverchat

() 2014
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or
by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. Any
unauthorised reproduction of this work will constitute a copyright infringement, rendering liability both under civil and criminal law.
4
ISN 1013-1507 COVER MARCH 2014

Mar 14.indd 4 2014/03/11 3:05 PM

Untitled-1 1 2014/03/11 1:41 PM
 Editorial
Tony van Niekerk Editor-in-Chief

Industry
From reducing crime, to making business more efficient
and then to reducing risk on the road by rewarding good
driving behaviour, it is clear that the insurance industry,

value shines
through its service providers in the telematics industry, is
making a difference that should be sung from the hilltops.

FUTURE OF A NATION

through again It is no secret that South Africans are shocking at saving,

and its getting worse. The culture of spending rather
than saving is depriving our economy from capital and
preventing people from taking advantage of business
opportunities due to a lack of their own capital.
Our two main features this week, Telematics
and Childrens Education, again reflect the The industry provides a multitude of highly efficient
contribution our industry makes to assist with savings vehicles to consumers and projects and initiatives
to educate clients. However, the take-up still leaves a lot
reducing the challenges, and unlocking the to be desired, which is why renewed efforts are being
opportunities that lie before South African called for by the industry. In this feature we showcase
society. what the industry is doing to encourage savings, especially
when it comes to education. As can be seen through
Telematics have shot onto the stage over the last 15 years the contributions in this feature, the industry has taken
or so. Starting off as purely a tracking industry, its efforts ownership of its obligation to inform and educate clients
significantly reduced vehicle theft and hijacking. One of regarding the need for saving.
the main features of the tracking industry is the positive
cooperation that resulted between the insurance industry, The future of our nation lies in education and, once
the tracking industry and the South African Police Service. again, the efforts of the industry will ensure growth in
accessibility of education for the country as a whole. Now
The next step in the evolution of telematics came in the if only we can get further assistance from the government
form of fleet management, where employers were assisted through tax exemptions and a Microinsurance Bill that
by the tracking industry in managing vehicle fleets and the makes concessions that can ensure effective distribution in
activities of their employees. The effect was significantly particular markets.
improved vehicle management and cost control in the fleet
management environment. Enjoy the read.

Then came the generalisation of telematics into

mainstream personal lines insurance when insurers actively Tony
started monitoring and recording data on private clients
driving behaviour. The results have been exciting, to
say the least, showing drivers responding positively to
suggested improvements in their driving behaviour.

6 COVER MARCH 2014

Mar 14.indd 6 2014/03/11 3:05 PM

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 o f
s t
d W e
ic s
a t ild
W i l
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m an c
W
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u r
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l
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T h i

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i e r
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ha p
S

They say necessity is the mother of all invention, and the insurance technology
industry in South Africa has certainly lived up to this adage. Local tracking
technology has developed from basic tracking devices to being a platform for
private and public partnerships in the fight against crime, with the insurance
industry playing an instrumental role in decreasing criminal activities.
Telematics is the new frontier, with insurers set to shape the future of driver
behaviour, and with the vision of safer roads and profitable motor books firmly
in sight. However, first we have to manage the big data challenge, namely, what
to do with all the information? Some insurers have already taken the plunge
with comprehensive incentive plans linked to improving driver behaviour,
while
8 others are still testing the waters. COVER MARCH 2014

Mar 14.indd 8 2014/03/11 3:06 PM

 Telematics

Telematics creates
innovative insurance
Telematics is a technology
manage risks of all kinds much better,
which has transformed the lower costs and ensure customer
fleet management business. In satisfaction thanks to rapid, intelligent
the near future, telematics will investigation.
revolutionise the automobile BIG DATA MINING, THE BIGGEST
insurance industry. OPPORTUNITY FOR THE
INSURANCE INDUSTRY
Emad Isaac, CTO of LoJack, worldwide Vehicle telematics is producing huge
provider of tracking and recovery and increasing volumes of data
systems, defines telematics as the and vehicle management now is a
collection, aggregation and storage highly data-centric business. Access
of pertinent data that can be digested to this information, among others,
locally, or post-processed remotely. enables insurers, risk managers and
While this definition suggests a financial planners to optimise account
universally applicable technology, the management and reduce the cost to
term is usually associated with the their clients.
vehicle market.
ANALYSING THE DATA
GPS navigation, integrated hands- As a fleet management company,
free mobile phones, automated data management has become one
emergency notification for vehicles of our key strengths. Our competitive
and driving assistance systems are all advantage lies in our innovative
telematics devices which transmit data systems and solutions to manage
to a central processing site. Pertinent telematics data known as Mobi-fleet.
decisions can now be made based on Fleetmatics VMS, therefore, is in a
real-time information. position to provide fundamental know-
how to the vehicle insurance industry.
Every second, vehicle telematics
devices produce data on date, time, Time is money. Telematics data has to
speed, position, acceleration, and be collected, evaluated and exploited
mileage and fuel consumption. The quickly and in a focused manner. This
data volume is several megabytes per is what Fleetmatics VMS is all about.
annum per customer. This volume Our total fleet management system not
is easily handled by modern data only allows for the above mentioned
processing facilities. The real challenge telematics data to be recorded and
is to make sense of the data. analysed, but additionally provides
operational information to fleet
WHAT ARE THE BENEFITS managers such as maintenance and
FOR INSURERS OF ON-BOARD service records (ensuring manufacturer
TELEMATICS SYSTEMS? warranties are protected) and crucial
For fleet operators the ability to safety and recovery services.
acquire and process vehicle information
is crucial in order to make informed CONCLUSION
decisions. This not only results in cost As vehicle telematics systems become
savings, optimised driver behaviour universal, progressive insurance
and effective route planning, but also companies, in step with their fleet
allows dynamic, life-saving accident management colleagues, will turn to TEBOGO MOGASHOA,
management. telematics data not just to provide Chairman, Fleetmatics
discounted premiums, but rather to
Very importantly, for the insurance provide a turnkey, full value proposition
industry, on-board vehicle telematics to fleet owners. Those who are first and complex telematics data will
produce invaluable data to assess off the mark will be the market allow insurance companies to base
claims scientifically, and to manage the leaders. Late comers will be forced to their premium on a clients past and
claims process quickly and efficiently. play an expensive game of catch-up. projected driving performance. This is
Therefore, insurers are able to The intelligent analysis of voluminous innovative insurance!

COVER MARCH 2014 9

Mar 14.indd 9 2014/03/11 3:06 PM

 Telematics

Understanding new directions

The benefit of insurance telematics
lies in the opportunity for the insurer
to manage driver behaviour, and
reduce the loss ratios on the book
of clients due to accidents. A large
percentage of insurance claims pertain
to accidents, and speeding is a leading
cause of vehicle accidents. Telematics
answer the how and why questions
with tangible evidence for proactive
planning and intervention.

Telematics allows insurers to be

more granular in the analysis of their
insurance book. No client ever has to
be painted with the same brush as
broad market statistics dictate. Through
the analysis of telematics feedback,
insurers can reward good driving
behaviour with reduced premiums,
and penalise bad driving behaviour.
It allows insurers to assess whether
clients have disclosed their vehicle use
in line with what they are insured for.

It is very important to deal with

brokers on the topic of insurance
telematics and to educate them on its
advantages. Brokers can advise their
Technology in the tracking Vehicle theft is not a significant clients on telematics. In this day and
problem in Europe. The Cartrack age there is a clear benefit to having
industry has advanced rapidly
branches that weve opened in the ability to save on your insurance
in the past decade. The Singapore, Spain, Portugal and premiums by simply driving safely, not
industry initially relied on Radio Poland do not only sell stolen vehicle to mention the knock on effect that it
Frequency (RF) units and later recovery units, but fleet management will have on road safety.
solutions, said Pierre Annandale,
evolved to Global System for National Administrative Manager at
Mobile Communications (GSM) Cartrack.
and Global Positioning System
The use of CAN bus information and
(GPS) technology. visual information in the form of on-
board cameras will propel the tracking
The accessibility of GPS, a space- industry to new heights of deliverables,
based satellite positioning system, providing the means to revolutionise
on a commercial basis heralded the the way that we drive.
start of telematics that currently
defines the tracking industry and its It is simply not enough to know that
fleet management capabilities. The the vehicle is on route to Durban, the
introduction of an accelerometer to a fleet manager wants to know what
tracking device provided the means the driver is doing in the cab, what
to determine driver behaviour by is happening on the road and how
computing the forces, in terms of both the driver is driving the vehicle, said
direction and quantum, applied to a Annandale.
vehicle in real time.
CAN bus technology provides
While the South African tracking information from the vehicles on-board
market is fundamentally different computer with regards to the vehicles
to that of overseas markets, the fuel level, revolutions per minute JOHN EDMESTON,
technology and functionality is the (RPM), what gear the vehicle is in and Managing Director
same. harsh braking, among others. Cartrack

10 COVER MARCH 2014

Mar 14.indd 10 2014/03/11 3:20 PM

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Untitled-1 1 2014/03/11 1:43 PM

 Telematics

BRETT ERASMUS
Executive Manager Broker Division
Oakhurst Insurance Company1

Time to embrace telematics!

After achieving great levels By understanding how our clients drive, This technology also allows us to speed
the one size fits all premium becomes up the claims process as it is now
of success in Europe and the
a thing of the past and we can now easier to verify the clients account
US, telematics made its debut rate our clients accurately. If our clients of the event which resulted in their
in South Africa and, while drive responsibly, not only will they subsequent loss, decreasing incidents
embraced by some, others have save money on a lower premium, but of fraud and saving on investigation
they will also be rewarded with up to costs.
greeted it with a great deal of 25% of their monthly premium back in
scepticism. cash.* We believe telematics is the future of
insurance in South Africa. Its time for
The general public in South Africa An added benefit of our telematics the industry to embrace telematics
see telematics as the Big Brother of technology is the ability to monitor its here to stay!
insurance, there to watch and monitor our clients safety. If one of our clients
them in an effort to find ways not has been involved in an accident, the
to pay a claim. This, however, is not Smart-Box is able to, within seconds, 1
Oakhurst Insurance Company Limited (Reg
true. Telematics is here to shape driver send us an alert so that we can provide no 2006/000723/06) is licensed in terms
behaviour so that clients can improve immediate medical and roadside of the FAIS Act FSP No 39925 and is
their driving and be rewarded with assistance. This benefit saves lives authorised to provide financial services.
reduced premiums or cash back. and reduces the risks associated with
potentially life threatening injuries. *Risk profile dependent. Ts and Cs apply.
With telematics now readily available
in South Africa, one major hurdle still
remains. What should insurers be doing
with the raw data received from these EVERYTHING IS CONNECTED
devices and how can the data be used
to assess and benefit both the insurer
and the client?

We believe that weve managed to

overcome this. Oakhurst Insurance
Company Limited has been working
with the embedded telematics
technology for the past five years and
has developed a way of analysing and
using the data effectively.

Our experience in telematics has

allowed us to introduce indicators
which we use to determine good
driver behaviour. These indicators are
measured (using the Oakhurst Smart-
Box, our telematics device) against
our average client driver profile and
has allowed us to introduce our Good
Driver Programme.

This is what differentiates us from our

competitors and has enabled us to
become leaders in telematics in South
Africa. Our Good Driver Programme
is all about rewards and cheaper
premiums for good driving behaviour.

12 COVER MARCH 2014

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Untitled-1 1 2014/03/11 1:44 PM
 Telematics

Hauling in costs
from all angles
Since its launch in February 2013,
more fleet owners have bought the
I-Cab telematics device. The system
uses advanced technology designed
and built in South Africa to allow fleet
owners to gather evidence on road
conditions and to help understand
driver performance.

The cameras on the I-Cab device

provide real-time footage, which
is directly transferred to a 24/7
monitoring room. It allows us to
provide clients with a risk report on
each driver, backed by video tapes and
real-time evidence, says Tom Halliwell,
owner of Libra Brokers.

Our statistics show that 80% of heavy

commercial vehicle insurance losses
are due to driving behaviour. Using the
I-Cab device in the past few months,
we have already seen improvements
to how drivers monitor themselves,
South African haulage company reducing the severity and frequency of
of any company vehicle is an important accidents, adds Halliwell.
owners face many challenges responsibility which both the employee
that are mostly out of their and business owner should take The telematics system can be used to
control, such as endless fuel seriously. It is vital for companies to resolve hijackings. This system allows
have the correct measures in place to fleet owners to take a proactive rather
price increases, an unstable than reactive approach when it comes
monitor vehicle and fleet usage.
rand, fraying road network to risk management. By doing so, we
infrastructure and hijackings, Santams LiveTrack fleet offering, can help businesses reduce their risk
which is backed by cellular provider, and disruptions to their operations.
and should therefore manage
Vodacom, enables fleet owners to
the risks they can control more manage their risks better as they are
closely. provided with important information
assisting them with trip management
Among those risks are the numbers including, pre-planned routes, vehicle
of accidents that took place on South location and cost management.
African roads last year primarily
as a result of infrequent stops Monitoring driver behaviour is what
and inexperienced truck drivers. underlines motor tracking data
Researchers at Monash University and telematics. For vehicle fleet
Accident Research Centre in Australia management, it is important for
recently found that long-distance employees and fleet owners to
truckers are almost three times more understand that managing driving
likely to have an accident when they behaviour could lead to substantially
drive during midnight to dawn hours lower insurance premiums as a means
with few breaks. They found that less of rewarding good driving habits.
experiences drivers were three times
more likely to be involved in a non- Santam has collaborated with Libra
fatal accident. Brokers in launching the innovative
telematics system for fleet company
Businesses must manage driver owners to find ways to influence
SHEHNAZ SOMERS
behaviour as accidents can dent a driving behaviour constantly and ensure Head: Commercial Underwriting
companys financial position. The use better risk management. Santam

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Untitled-1 1 2014/03/11 1:44 PM
 Telematics

Telematics 2.0 and beyond

Keeping a short leash on all things moving

MICHAEL NIEUWOUDT
Consumer Sales Director
Telematics is changing auto- Tracker has recently developed an
Tracker
iOS and Android-optimised driver
insurance in South Africa. With
behaviour app for the local market that
around 12 million smartphones transforms users smartphones into the app and you are allocated a score,
in use locally and alarming mobile and cost-effective telematics while also giving the insurer live, real
projections of penetration and devices. The app gathers in-vehicle time data.
information that improves driver
usage, this phenomenon cannot interactivity in real time. While the box Insurance customers are clustered
be ignored Telematics 2.0. delivers slightly more accurate data, according to their score. Telematics
the mobile handset adds a layer of apps provide an opportunity for drivers
Telematics 2.0 uses smartphone based engagement, which will put the power to have their own data on hand.
sensors rather than black-box devices into the hands of the driver. Eventually an app user can go to the
as in the traditional pay as you drive insurer with the knowledge that they
insurance industry. Users can switch off the phone and are accurately scored according to
the app will continue to run in the their own driving behaviour and skill.
Tracker believes that while smartphone background. The app is designed to It provides insurers the opportunity to
technology will be all it is touted to be, start when the accelerometer goes over improve customer engagement and
they havent thrown away the black- a specified speed, so the data remains service, while having the potential to
box device just yet. robust. make our roads safer.
Smartphone technology will be an The app captures trip data to establish For the first time, communication from
important catalyst in the industry. driver behaviour, and then sorts you insurer to the customer is far more
Our research and testing has shown into the appropriate cover category. open. In the case of an accident, not
that optimal data is gathered when How many times you were speeding, only does the telematics app allow you
smartphone devices are integrated with whether you texted or called while to take pictures instantly of the scene,
the box, not as a substitute. driving, are all fed into the algorithm in it also gives you fields to capture
details, which uploads immediately
into the system and integrates directly
into the insurers data. The insurer is
then notified, resulting in an almost
real time call to the customer from the
insurer. The customer can also call for
assistance.

To throw some more big data into the

mix, the global telematics market is
poised to grow exponentially in the
future, with approximately 104 million
new cars expected to have some form
of connectivity by 2025. With whispers
of steering wheel and voice controls
nearing the horizon, the future seems
a safer, albeit strange, place.

*The app will be available from various

insurers.

16 COVER MARCH 2014

Mar 14.indd 16 2014/03/11 3:24 PM

 Choice Elements - CMYK

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Untitled-1 1
MomentumSTI_Cover_MARCH2014.indd 1 2014/03/11
2014/02/03 1:45
10:22PM
AM
 Telematics

ROUNDING UP
DATA TO IMPROVE
BEHAVIOUR mitigate this and improve the recovery
process, especially when determining
Shaping driver behaviour which driver caused the accident.

Telematics allows insurance providers

to identify false accidents and to
recognise true accidents but false
Telematics is fast becoming the damages, provides useful data to prove
most effective and scientific way bodily injury and damage to goods,
on South African roads
to calculate motor insurance and mitigates the chances of false
declaration of residence.
premiums and to improve driver
behaviour. For the success of For brokers, the data collected from
its implementation into the the telematics devices will provide
an insight into the driving habits of
South African market buy-in and the policyholders, and the technology
support from policyholders are can help consumers sell their cars.
necessary, especially around its For those who are good drivers, a
telematics driving report will improve
benefits.
their chances of being able to get a
better price on their vehicle.
The introduction and resultant
reservations of telematics into the The future of telematics looks very
insurance industry is completely promising. Vehicle manufacturers are
natural. When the European insurance already starting to develop cars with
market introduced telematics around built-in telematics technology and
10 years ago, it faced the challenge of hardware.
overcoming the stigma of telematics
being a big brother initiative, as With the rate that technology is
many consumers wrongly believed that advancing, telematics could drive your
their claims would be repudiated due car for you in the future. Googles
to the data being collected from the driverless car is an example of where
telematics device. the technology is going and with
telematics cars would be able to talk to
There has been a notable shift in the each other in order to avoid accidents
European consumer mind-set since from taking place.
then, where the benefits of telematics
now far outweigh the concerns of
consumers. In Italy, for example, the
courts now accept telematics data to
reconstruct accidents, in the event of
third party claims.

South Africa is still new to the

technology and it is important to
highlight to policyholders that negative
data can only be used if it is relevant
to the claim. For example, if the client
speeds excessively, but the motor
vehicle is stolen, the data around the
speeding is irrelevant and will not
impact the claim.

Telematics make immediate emergency

response to traumatic events possible.
For the insurance sector, telematics can
help in risk profiling and provide a way
to reduce premiums. Only one third
of drivers on South Africas roads are
insured, which has not only increased
premiums as a result, but it has equally CHRISTELLE FOURIE
hindered the recovering process for Managing Director
third party claims. Telematics will MUA Insurance Acceptances

18 COVER MARCH 2014

Mar 14.indd 18 2014/03/11 3:24 PM

 Shift to usage-based
insurance accelerates

RHYS COLLINS
Head:African Operations, SSP

There is growing evidence that

recently commissioned Incisive Media attracting safer, better drivers who
usage-based motor insurance is to carry out a study among 27 global therefore enable insurers to cherry pick
now on the brink of widespread insurers to explore Enriched or Blended profitable customer segments.
industry-wide adoption in the Data in general insurance businesses.
For insurers the introduction of
UK and Europe, but are insurers The study looked at what stage telematics is having a greater impact
ready for the business impact? telematics had reached and found that than expected on business processes
What lessons can be learnt by despite the newness of the technology and the business model. Typical issues
it is encouragingly starting to deliver they are encountering include having
South African insurers who have on its promises of reliable, accurate to cope with the sheer volume of
not yet ridden this wave? data that can be used to design and data at the technical level, agreeing
offer usage-based insurance. In spite on the ownership and use of the data
Compelling arguments support the of these results and the fact that most within the company, choosing the
move. An information-based business of the companies who participated right telematics strategy from software
with deep customer knowledge offers reported some degree of activity, SSP selection to commercial ambition, and
a potential route away from commodity estimates that take up is still in its understanding the data in a way that
pricing and towards individualised infancy. contributes to the commercial success
premiums. In the process, risk is of the company.
reduced and margins will improve. The next phase will need to focus
on the business processes, customer Telematics creates business challenges
Like most other technology offers, and commercial benefits to be around managing large volumes of
advancements, telematics and related gained. Some of these developments data and concerns around which model
technologies are maturing quickly. The may reduce costs through more- to adopt. But it is clear that the new
costs of implementing and operating efficient and safer journeys for the data offers potential business benefits.
the technology are also coming down, drivers, while some developments Telematics trailblazers are beginning to
with a healthy market of service may focus purely on the benefits to see profitable opportunities, and the
providers who are willing and able insurers. It has been demonstrated in challenges lie, surprisingly, in the non-
to help insurers get going. The SSP the UK that telematics improves driver technical areas.
SoteriaDrive telematics solution for behaviour and engages the customer.
example is quickly implemented using In addition, first mover advantage
a smartphone app. SSPs global office is evidenced, with early adopters

COVER MARCH 2014 19

Mar 14.indd 19 2014/03/11 3:24 PM

 Telematics

The next frontier GRANT FRASER

of telematics
Divisional Director:
Product and Marketing MiX
Telematics (Consumer)

Some of the prevalent Consumer telematics is leading the Telematics-based insurance products
encounters identified in the big data sensation of today, touching have several core advantages: growth,
telematics space are the various companies from insurers and retention and transformational
fleet operators to rental companies improvement. However, there are
eruption of data, social media, who are now starting to use telematics some main challenges facing the
the proliferation of channels to improve insights of how consumers industry no blueprint for telematics
and devices, and the shifting of are using their offerings. It is an integration within the commercial
exciting market, as auto OEMs are insurance industry and the need to
consumer demographics. These associating new infotainment and deal with complexity and velocity of
dynamics serve as a catalyst for safety applications with their brands big data, as the insurance telematics
change, driving both challenges and experimenting with various market evolves. Behavioural metrics
subscription models. This ecosystem is should become standardised with data
and opportunities for an
delivering solutions for the connected aggregation and ownership models that
organisation. car market. improve the customer experience, by
enabling consumers to share driving
Extraordinarily, the two most influential UBI (user-based insurance) is fast data securely without having to switch
forces identified is the rapid evolution becoming a necessity for insurers as devices or cancel telematics services.
of technology and markets. These they search for ways to control claim
two forces drive increasing levels of costs, enhance pricing sophistication, UBI can provide solutions to overcome
complexity with products and services. improve profitability and differentiate many wider government and social
Engaging with customers is more than their products and services. With a issues such as congestion in urban areas,
just communicating with them its number of services accelerating the lowering carbon emission goals and
about helping them enjoy the products growth of telematics, UBI will reach a increased safety. UBI has the ability to
and services they have acquired tipping point sooner than many would assist with predicting a propensity for
and collaborating with them to co- expect. For many organisations the loss through real time customer scoring
create new products. To understand need to manage high-risk drivers and and data mining of customer driving
this means getting closer to them. reduce loss and accident costs are behaviours, including location, time,
Customer expectations are increasing increasingly important; telematics data driving styles and vehicle types. This can
and they expect improved products and provide high-risk solutions which can also assist consumer satisfaction levels
services, more choices and additional be added to pro-active training and through faster claims handling, roadside
value. intervention. assistance and stolen vehicle recovery.

20 COVER MARCH 2014

Mar 14.indd 20 2014/03/11 3:24 PM

 Weve again come out on top in the national PMR.africa survey
of the insurance industry

New National Assurance and AC&E- proud to be

the best engineering underwriters in SA

4|9SAs oldest black insurer | An A rated company | FSP 2603 |P

www.nnac.co.za
MR.africa VOL 24 ISSUE 1 2014

Untitled-1 1 2014/03/11 1:46 PM

 Telematics

Challenging boundaries,
gaining new grounds
Ctrack has been established in
the UK for the last eight years
and in Australia for the past 12.
They have built their business
opportunities into solid pillars
of new technology deployment,
such as insurance telematics,
which have been well received
with the current product in UK
and the POC running in Australia

They are also currently introducing new

technology into 17 African countries.
COVER spoke to Ctracks Chief
Operating Officer, Mark Rousseau,
and Chief Technology Officer, Deon
du Rand, about their local and
international telematics footprint.

HOW DO THE UK AND

AUSTRALIAN MARKETS COMPARE
WITH THE LOCAL MARKET,
INCLUDING DISTRIBUTION
MODEL? the capability not only to measure
Mark: These markets are similar in TELEMATICS DATA but to predict potential risk behaviour
terms of solution requirements, but through the use of modern analytical
somewhat different in market selection IS MANAGED AND tools.
and deployment. In the UK we work
directly with insurers and with third DISTRIBUTED BY OUR DO YOU THINK WE SEE AN
party national installers managing the UPTICK IN THE NUMBER OF
distribution of product. Telematics data OWN TECHNOLOGY INSTALLATIONS BECAUSE
is managed and distributed by our own CONSUMERS ARE TAKING TO THE
technology operations.The POC in
OPERATIONS.
MODEL, OR IS IT STILL VERY MUCH
Australia is a tri-party establishment. INSURER DRIVEN?
is a long way off. A good example is Deon: Its only insurance and benefit
WHAT IS THE FUTURE OF the eCall system in Europe compared driven because of normal human
PROPRIETARY TELEMATICS to insurance telematics eCall is an behaviour.
SYSTEMS IN RELATION TO extremely simple concept and system
DEVELOPMENTS FROM MOTOR with agreed standards, yet it took ARE YOU SEEING ANY CHANGES IN
MANUFACTURERS? more than 10 years to get it into new DRIVER BEHAVIOUR AS THE USE
Deon: When studying the OEM vehicles. INCREASES?
(original equipment manufacturer) Deon: The Success of Discoverys
infotainment and insurance telematics TELEMATICS SEEMS TO BE MOVING Vitality benefit programme and the
industry it is clear that telematics MORE TOWARDS DATA ANALYSIS, fuel benefits they give every month
are co-opted into the infotainment WITH DATA GATHERING SAID is a clear indication of the success
system and extended into the TO BECOME JUST A TICKET TO and change in driving and motoring
maintenance and roadside assistance THE GAME. HOW IS CTRACK behaviour.
services provided by OEMs. Supplying RESPONDING TO THIS?
information through the on-board Deon: Ctrack has built on it Fleet WHAT ARE THE DEVELOPMENTS
communication system for example driver rating, debriefing and training REGARDING COMMERCIAL
the telematics capability to report experience to developed Ctracks next DRIVERS AND COMPULSORY USE
movement and driver behaviour generation driver behaviour models. OF DRIVER MONITORING?
information to a third party we believe Existing Ctrack technology already has Mark: We are considering our options.

22 COVER MARCH 2014

Mar 14.indd 22 2014/03/11 3:24 PM

 Together we can
grab Worry by
the scruff of its neck,
poke it in the eye
and give it
a good old wedgie.
Oh, and we can also sell insurance together.

personal commercial corporate investments Hollard Short-term, Hollard Life and Hollard Investments are Authorised Financial Services Providers.

Untitled-1 1 2014/03/11 1:47 PM

 Toniflap / Shutterstock.com

Art & Collectables

24 COVER MARCH 2014

Mar 14.indd 24 2014/03/11 3:24 PM

 Art and Collectables

Insuring the irreplaceable BY TARYN KERR

COLLECTORS ARE BUYING A LIFESTYLE. IT
GIVES THEM A CONNECTION TO A DREAM.
- PENNY DUNCKLEE, FINE ARTIST

South Africa, pre-1994: The Gordon Massie, founder and director of

Artinsure, has thirty years experience
interest in South African art and
in the international art and insurance
artists was dwindling at best, world. Massie realised the importance
compared to the international of specialised underwriting management
art world which was booming. and insurance policies for art in
South Africa, when his short-term
Big policies for art insurance insurance broker was unable to offer
had to be taken to London, as him a suitable policy for his own art
there was no solution locally. collection. In my old company I did
market research and I found that the art
In 2002, the South African art world which included auction houses,
world exploded with the value dealers, corporate and private collectors,
percentage in local art increasing artists, antique dealers and exhibition
extraordinarily. SA art and organisers were completely unserviced
by the local market. They were getting
collectables were being bought sold a standard policy, and there was
and sold at exponential rates, no product or real knowledge of how to
and the awareness of the need handle the claim, explains Massie.
to insure this value grew. The establishment of Artinsure in
2007, partnered with Hollard, was met
Art and collectables are appreciating with mixed reactions. We had to take
assets, as they tend to rise in value old tradition, rip it up, and create new
continuously. This also means that products, he says. Today, Artinsure
they behave very differently to continues to be a strong and growing
normal assets, as an insurer cannot business, assisting brokers to help their
simply replace an artwork as they clients with the valuation and insurance
would other short-term insured of their special collections.
depreciating assets. Art collectors
and art businesses in this country BUT NOBODY STEALS ART IN THIS
are concerned with claims and the COUNTRY?
knowledge of how to handle these It is a common South African perception
unique claims is imperative to the that theft in this country occurs on a
customers collection. minor scale, stealing any item that can

INSTITUTE OF LOSS ADJUSTERS OF SOUTHERN AFRICA

CONFERENCE 22 MAY 2014
GLENHOVE CONFERENCE CENTRE
52 Glenhove Road, Melrose Estate
08h30 15h30
BE SURE TO DIARISE THIS DATE MORE DETAILS TO FOLLOW
ILA_teaser_quarterpage.indd 1 2014/02/12 11:49 AM

COVER MARCH 2014 25

Mar 14.indd 25 2014/03/11 3:25 PM

 Art and Collectables

quickly be transferred for drugs or quick most frequent for art and collectables. EMOTIONAL ATTACHMENT TO
cash. Artinsures Art Theft Register Accidental damage is huge, and you YOUR ASSETS
(accessible on their website), paints a can understand why, says Massie, it The art and collectable insurance
very different picture. happens a lot but these are things that sector can be classified as low
we can work against. frequency, but high severity. Expert-
According to the register that was eye art valuation is incredibly important
produced just over two years ago, art If a work is damaged accidently, a as stolen art can set an insurer back
and collectables theft is rapidly growing panel of world-class restorers are ten or twenty million rand, and
in South Africa, with criminal enterprises usually able to restore the item to incorrect valuation leads to client
and syndicates stealing items with an outstanding aesthetic. It has still dispute. On the same front, art and
enormous value or cultural symbolism. been damaged, and the experts, collectable cataloguing is also essential
There is an increase in opportunistic auction houses and ultraviolet light in order to attempt to restore art in the
theft, along with an increased awareness investigation will identify that it has event of theft.
of the value of certain artworks. The been restored. Our policy is that we
internet also poses a problem to art and restore the item and depreciate the The claims do not happen often, but
collectable theft, with thieves selling item for the client, he explains. If a when they do they are catastrophic
valuable pieces online to innocent collector no longer wants the item, in two ways firstly the value is
buyers, for next to nothing. Some would they are able to declare it a total loss incredibly high, and secondly the
call it a steal, without realising how and receive compensation for the relationship that most of our clients
much of a theft it actually is. original value of the item. have with their artwork is a very
strong emotional attachment of years
Theft makes up the second largest Understanding the art world, and how of building their collection, Massie
part of art and collectables losses, and differently the art world behaves is says.
Artinsure in combination with their Art crucial to this specialised insurance.
Theft Register, works hard to restore Having products that can respond to ARTINSURE PAINTS A NEW
items to the collectors. clients, specifically how you behave PICTURE FOR POLICY
and respond underneath the policy In March 2014, Artinsure launches a
WHAT HAPPENS IN THE EVENT OF wording, separates niche insurance new product that will take art and
ACCIDENTAL DAMAGE? companies and general commercial collectable insurance to a further
Accidental damage claims are the insurance companies. specialised height.

26 COVER MARCH 2014

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 Massie offers the simplistic example value. If it has not increased in value, sector, Massie says that claims
of an artwork valued at R50 000, then we will pay out what is on the expertise in this country have been
that increases to R60 000 within a policy. well-developed. As the market
year when the policy is renewed, but continues to grow, I welcome general
questions what happens on day 102? Artinsure is the first in the country to players who include art in their high
He reiterates the fact that art and offer this product change, and have net worth policies to become involved
collectables appreciate everyday, which been working with actuaries and in developing specialist skills in order to
meant the need for a product that professionals in order to perfect the deal with art claims properly.
would take this consistent, every day complex mechanisms behind being
appreciation into consideration. able to deliver to clients a service that Art and collectables insurance is very
goes beyond simple policy wording. different in the way it behaves, and
The product change that will be New and renewing policy holders of thus specialised risk management
introduced ensures an automatic private and corporate collections will techniques and skills are needed to
change in value at the point of claim, have the new product change put into protect a clients needs. Artinsure
with this value never being below the their policy following March. acts as the steppingstone between
original policy value. Massie says that, the broker, the insurance policy, the
The new product change says that at Despite the South African insurance protection of art and collectables and
the time of loss, we will re-appreciate field lacking specialist players to ultimately client satisfaction.
the item and pay out on the increased manage the risk of this specialised

TLC for Art and Collectables

Arts and collectables are The peril to which art is exposed is
often unique, such as opportunistic
becoming increasingly popular
and or targeted theft where the
investments, reserved not only objective is to ransom the art and thus
for the upper echelons of society. there is not intent to steal or damage
Carel van der Merwe, MD of it. If you do not have understanding
of this, it will lead to a contract of
Marshs Commercial Practice, insurance that falls short of the clients
discusses the need for special needs.
attention when it comes to art
SOUTH AFRICAN EXPERTISE
and collectables. IN THIS SPECIALISED RISK
MANAGEMENT?
Risk management and insurance of art We are fortunate to have a number of
and collectable items do not fit well in specialised underwriters in South Africa
standard all-risk policies, and special through a comprehensive monetary that do have the required level of skill
attention is needed to ensure clients payment, which does not cater for any and understanding, but like the balance
are sufficiently covered. On the other emotional connections that one may of the industry, there are probably not
side of the scale are large corporate have to the lost item. enough.
companies who hold vast portfolios
of valuable art and collectable pieces, The other key issue is that of Managing claims in this market
many of which are scattered across a determining a value of the item. requires more than a technical skill
network of properties in South Africa. With art and collectibles being an it requires an appreciation for art,
investment, determining a value is collectibles and the industry itself.
SO WHY THE NEED FOR SPECIAL very difficult because often the value Collectively, underwriters, brokers and
ATTENTION WHEN IT COMES TO is only based on what a buyer would the specialised appraisers are at least
ART AND COLLECTABLES? be willing to pay at the time of sale. in a position to offer the market some
If we consider just two aspects of our This means that the potential value of quality guidance and solutions.
most precious art and/or collections, it the item at the time of buying a policy
will become abundantly clear to owners becomes a difficult discussion and is Wide of the usual advice and guidance
why they need to pay close attention mostly taken at what was paid plus a provided to clients by brokers,
to the way they manage and insure reasonable and agreed escalation over Marshs preferred underwriters have
their assets. time. partnerships with specialist adjusters,
restorers and recovery agents. The
In most cases, the subject-matter is Further, when a loss is partial such as team also work closely with an
irreplaceable you cannot simply get accidental damage, the response of international network including Interpol,
a replacement as you would for lounge a policy is usually limited to the cost FBI, Scotland Yard, Art Loss Register
suites or hi-fis. This limits the options of restoration by a professional but and Trace to provide a comprehensive
insurers have to indemnify clients. In will not respond to the consequent solution to partial or total loss of the
most cases, clients are compensated devaluation. unique item.

COVER MARCH 2014 27

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 Short-term

Are you aware of

your exposure?
However, the typical claims brought provided about the intended use of
against manufacturers include: the product, how it should be used,
and any limitations. A product risk
Violation of warranty or guarantee assessment is necessary to develop
when an express or implied effective labelling.
statement about a product proves to
be incorrect; BUILD CONSISTENTLY TO
SPECIFICATIONS
Negligence when it can be proven A systematic design process produces
that a duty of care is violated. The detailed product specifications.
most basic duty of care is that Specifications are only useful in
products are reasonably safe for defending allegations if the product
distribution; and was built in accordance with them. If

REDUCING PRODUCT LIABILITY IS NECESSARY TO PROTECT

YOUR BUSINESS FROM CLAIMS IF OR WHEN THINGS GO WRONG.

different components or processes are

ERIC DOM Strict liability the onus of disproving
Underwriting Manager Liabilities introduced, the design specification
liability moves to the supply chain.
Global Casualty, AIG South Africa Limited becomes meaningless. This is even more
Reducing product liability is necessary critical with food and drug products;
to protect your business from claims if manufacturers must prove that unwanted
or when things go wrong. This can be components were not added.
As a manufacturer of goods for
achieved through a number of generally
export, are you aware that your applicable approaches.
PAY ATTENTION TO CONTRACTS
BOTH IMPLIED AND EXPLICIT
products could open the door to
GETTING THE DESIGN RIGHT Even verbal statements can be taken as
product liability claims, and that implied contracts. With explicit (written)
This is the most effective and lowest
those claims could have serious cost method of avoiding product contracts, claims occur when they are
financial implications for your liability claims, and means that the unclear or open to interpretation.
business? design is safe for use and the product
UNDERSTAND REGIONAL
does what it is supposed to. Getting
REGULATIONS AND STANDARDS
With South Africa increasingly exposed the design right means far more than
Product liability principles are universal,
to international markets through just sending a product for laboratory
but there are international differences,
expanding import and export trade, it testing. Such a test only proves that it
particularly when it comes to product-
is necessary to acknowledge that all meets all known standards, which is
specific regulations.
products carry some risk. Furthermore, not the same as proving it is safe and
the increasingly litigious nature of suitable for its intended purpose. This In the next article, we look at how
the trading environment requires is because there may not be standards product safety risk assessments are
the introduction of a comprehensive that cover all aspects of the product. conducted.
approach to managing product liability Therefore, a product safety risk
risk. assessment is necessary. AIGs web-based Product Liability Service
is a training system which helps manage
In this series of six articles, we look at PROVIDING SUITABLE LABELS AND product liability risks. Courses cover
product liability and how companies WARNINGS management, safety warnings, risk
manage it. A significant number of claims are communication, legislation and standards,
due to a failure of product labelling, to promote good risk management. The
The associated exposures vary warnings and other information. Users service is supported by tools including
depending on several factors, must be fully informed of any risks that a model corporate product safety policy
including the markets in which trade is are not obvious. In terms of general statement, a self assessment audit and a
conducted. liability, detailed information must be risk assessment tool.

28 COVER MARCH 2014

Mar 14.indd 28 2014/03/11 3:25 PM

 Our Corporate and
Business Insurance sets
the standard when
it comes to:
Property
Commercial
Vehicle and Asset Finance
Marine
Guarantees
Agriculture
Corporate
Call us on 0860 999 334

Standard Bank Insurance Brokers (Pty) Ltd is an authorised financial services provider (FSP224).
A member of the Standard Bank Group. Moving Forward is a trademark of The Standard Bank of South Africa Limited.
Products are underwritten by Standard Insurance Limited. SBSA 3513-9/13

3513-A4-B-insurance.indd
Untitled-1 1 1 2013/10/15
2014/03/11 10:00 AM
2:50 PM
 Short-term

87 % OF THE

Consumer needs with RESPONDENTS

VIEWED THEIR

short-term insurance INSURANCE PROVIDER

AS SUFFICIENTLY
CONSUMER-
FRIENDLY.
Each month Santam unpacks an insurance topic with research derived from
exclusive Santam client surveys. As we acknowledge World Consumer Rights Day
on 15 March, this month the insurer looks at some topics that are of importance
to consumers when it comes to dealing with their short-term insurance provider.

From an industry perspective, these with its policyholders and being seen
insights highlight that consumers might as their partner, and intermediaries
be aware of the various regulations in play a crucial role in building those
place, however more can be done to relationships with clients, concludes
ensure consumers fully understand how Blaauw.
it affects them and their rights, says
Blaauw. THE CONSUMERS EXPERIENCE
WITH THEIR INSURER
The majority of the survey respondents The survey revealed that 86% of the
felt that insurers should be clearer respondents have to date had no
about the responsibilities that need to lodge a complaint against
consumers bear. their insurance provider. Those who
unfortunately have had to submit a
The survey showed respondents were complaint were happy with how it was
interested in better understanding dealt with and the overall outcome.
the roles of the intermediary and
relevant professional bodies, along The majority of the respondents
with topics such as under-insurance, indicated that whether they would
recovery processes, constraints around lodge a complaint about a serious
the sharing of information and the matter with the Ombudsman of Short-
regulations related to the non-payment term Insurance would largely depend
BEING IN THE KNOW: on how their insurance provider deals
UNDERSTANDING SHORT-TERM of premiums.
with the matter first.
INSURANCE We are in the business of rescuing
According to a survey by Santam, A major success factor for any
policyholders when disaster strikes.
consumers have a high level of customer-orientated business is to be
For claims not to be repudiated,
awareness of the regulations in place to consumer-friendly. According to the
we need clients to understand their
protect and inform policyholders, such survey, 87% of the respondents viewed
policy documents properly at all times
as the Consumer Protection Act (CPA) their insurance provider as sufficiently
and this is where the role of the
and Treating Customers Fairly (TCF). consumer-friendly.
intermediary is vital, adds Blaauw.
The survey shows that 87% of For those who felt that more can be
THE INTERMEDIARYS
respondents were aware of the done to improve on this front, the
CONTRIBUTION
consumer protections in place. survey showed respondents wanted
According to the survey, 73% of
more bilingual consultants and
Nonetheless, 66% of the respondents the respondents believe that their
user-friendly policy summaries and
also indicated that as a consumer, they intermediary has enabled them to
schedules.
would like to be more knowledgeable make better informed decisions about
about their rights when it comes to their insurance policy. On whether it is important for
short-term insurance procedures. policyholders to disclose all details of
Insurance, after all, is about being their previous claims history with their
The clients understanding of their there when your client needs you current insurance provider, 95% of the
policy is of utmost importance as most, without complication and respondents agreed and understood
it is crucial for any client to have unnecessary delay. It is our view that the importance of this requirement in
peace of mind in knowing that they consumers will always appreciate good, order for premiums to be calculated
are adequately covered and that personal, professional and valuable correctly.
they understand the relevant claims assistance from intermediaries. The
processes, says Attie Blaauw, Head of real value in any insurance business is
Personal Lines at Santam. dependent on its trusted relationship

30 COVER MARCH 2014

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 Financial Planning

Landmark year for African equities?

FUNGAI TARIRAH
Being nearly as urbanised as Head of Africa Investments,
A reduction in the US Federal Reserves
China, Africa has more than quantitative easing programme will Momentum Asset Management
50 cities with in excess of one also limit the amount of cheap money
million inhabitants. The region available for risky asset investments supply and lacklustre government
and turn Western investors attention activity in some countries, which does
proved extremely resilient back home where economies and not spur spending.
through the financial downturn, business prospects are improving.
with 2013 being a particularly Despite all this, however, a number of
With some profit taking having African stocks remain attractive and,
good year for African equities. taken place early in the year, market with nominal GDP growing at rates of
momentum is expected to slow c19% in Nigeria, c10% in Kenya and
With foreign investment driving share further until companies start their c6% in Zimbabwe, certain regions do
prices and commendable performance 2013/2014 reporting, at which stage seem to offer more return prospects
from a number of companies, African earnings quality can be reassessed and than the South African market.
markets enjoyed a bumper year in portfolios repositioned accordingly. Although liquidity remains a key issue
2013. Nigerian banks weathered In some instances, valuations appear on the continent, this, in my opinion,
regulatory storms and grew their books, rather extended relative to historical relates to how investors choose to
while a number of food and beverage trends and so certain businesses would invest their money.
companies upped their output volumes have to table some impressive numbers
and telecoms organisations improved to justify their ratings. If investment horizons are extended to
their earnings mixes. While we expect meet the true investment objectives
these trends to persist in 2014, foreign Possible detractors from corporate of most portfolios, a lot more room
participation in the continents markets earnings would be increasing country becomes available for the inclusion
may wane in the face of a realignment risk ratings due to terrorism, violence of propositions such as Africa in a
of monetary policy in (notably) the US. and civil unrest, intermittent power portfolio mix.

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GUARDRISK TAILORED RISK SOLUTIONS

An Authorised Financial Services Provider A member of the Alexander Forbes Group

COVER MARCH 2014 31

Mar 14.indd 31 2014/03/11 3:25 PM

 Short-term

Insuring the wealthy is

like insuring a business
While it is positive to note this financial improvements that, if not addressed,
growth, these high net worth (HNW) could lead to claim rejections.
individuals do face a unique challenge
when it comes to protecting their The types of risks that can be
assets and should be treated as a identified in a risk assessment could
business risk. include discovering that the alarm
system does not cover all areas of
The HNW market faces a greater risk the property. These risks should be
of underinsurance as a result of their highlighted by the insurers. If nothing
assets often being worth far more is done to reduce the risk, insurers
than the average consumer. It is should structure the policy to ensure
important to implement proactive risk appropriate cover for that particular
management (traditionally reserved for area.
commercial risks) into the insurance
process, to ensure the sufficient level A further example would be cracks
of cover required for these individuals. that appear in the wall, indicating a
lack of maintenance. Homeowners are
When insuring the wealthy, their advised to fix this immediately, as any
different tastes and lifestyles need claim that arises as a direct result of
to be taken into account by the poor maintenance will be repudiated
insurance company. Some people because it is the homeowners
enjoy highly public roles, entertaining responsibility to keep the property in
guests at parties, fundraisers and art an insurable condition.
exhibitions. Others may collect vintage
automobiles, rare pieces of jewellery Looking at the types of complaints
or expensive pieces of art. The risks that arise with the Ombudsman, these
that confront each individuals personal are usually as a result of insurers
assets can vary, which is why a tailored trying to underwrite the risk at claims
approach to insurance needs to be stage, when it is clearly far too late.
taken. By conducting a proper risk analysis
upfront, the correct risk premium can
Both wealthy consumers and be determined and the individuals
HNW brokers alike can make false claims are far more likely to be
assumptions about the level of risk. accepted.
Recent statistics from wealth
The assumption of the insured is that
consultancy, New World high insurance limits alone buying
Wealth, reveal that South the most insurance will take care
Africa is the wealthiest country of all threats to personal wealth.
Unfortunately, this is not always the
on the continent with 48% of case.
the countrys multimillionaires
A thorough risk management
(individuals with a net worth of
assessment should be conducted at
more than R300 million) living the inception of a new insurance policy
in Johannesburg, increasing from in order to mitigate the risk of claim
230 individuals recorded in 2007 rejections in the future.
to 285 currently. When wealthy consumers look at
updating their existing insurance
According to New World Wealth analyst policies or getting a new one, they
Andrew Amoils, the bulk of these should get a full risk assessment and
individuals live in the Sandton area, valuation by an independent and
particularly Sandhurst, Hyde Park, qualified assessor and/or valuator. The
Bryanston and Houghton. The majority report generated, which should contain
of the new multimillionaires earned proactive risk management advice, will WARWICK SCOTT-RODGER,
their money from telecoms, insurance, help the individual to make informed Head of Brokers
healthcare and banking. decisions about implementing risk MUA Insurance Acceptances

32 COVER MARCH 2014

Mar 14.indd 32 2014/03/11 3:25 PM

 Gearing your business
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Untitled-1 1 2014/03/11 2:52 PM

 Risk Management

Top five business

continuity risks for 2014
ContinuitySA warned in 2013 Cyber crime appears to be on upward
trend, with cyber criminals threatening
that business risks were
data. Denial-of-service attacks can
becoming more complex and cause systems to collapse, creating
intertwined, and more difficult business continuity risk. While
to predict and plan for. estimates of cyber crime prevalence
vary dramatically, its clear that it is
This year risks are becoming more both significant and underreported.
extreme.
THE MACROECONOMIC CLIMATE
Issues from other parts of the globe REMAINS PROBLEMATIC
can create risks here in South Africa, Slow, inconsistent global recovery and
for example, the unprecedented cold a volatile currency are obvious risks
weather in the United States and that most businesses consider but
severe storms in the United Kingdom. often from a financial perspective.
Decreased economic activity could
reduce tax receipts and so construction
of infrastructure.

DIRECTORS AND EXECUTIVE LONG SUPPLY CHAINS EXPOSE MICHAEL DAVIES

COMPANIES TO WIDER RISK CEO of ContinuitySA, asks:
MANAGEMENT MUST HAVE A Is extreme part of your thinking?
Gauteng e-tolling has emerged as a
COMPREHENSIVE BUSINESS proxy for political dissatisfaction for
middle and working classes. Continued
CONTINUITY PLAN IN PLACE. protests could disrupt supply chains and
raise short-term costs.

Longer supply chains combined with and services and where they order
The global business environment has a just-in-time mentality is creating a supplies from. International political
created a web of interdependencies huge risk. developments could derail the slow
and any event has knock-on effects. economic recovery. Iran and North
Directors and executive management Extreme weather in Japan and Thailand Korea are only two of many countries
must have a comprehensive business in past years has crippled international that could spark a new crisis.
continuity plan in place. car and electronics supply chains. A
comprehensive business continuity Following on from the attack on
ContinuitySA has identified five management plan for the whole supply Westgate Mall in Nairobi, violence
categories of risk for 2014 for business chain is mandatory. must be a consideration, particularly for
continuity planning. companies with pan-African operations.
ENVIRONMENTAL DEGRADATION
GROWING IT AND DATA RISK AND CLIMATE CHANGE Another big societal risk to business
IT is strategic and, to a greater or Aside from the obvious macro risks continuity is the new normal of violent
lesser degree, every business is a of violent climactic events and a and protracted strike action. Violent
digital business. Internal IT departments compromised environment, South and disruptive service-delivery protests
are failing to keep pace with changing African businesses need to pay are one example, but so are growing
needs. Instead they use private mobile particular attention to water. Our water rates of alcohol and drug abuse, not
devices and cloud-based services like resources are limited and becoming to forget anxiety and depression. All
Dropbox to access corporate systems. more polluted. Acid mine drainage is a of these factors have an impact on
Server sprawl is an IT risk that ticking time bomb. absenteeism and productivity.
creates complex environments that are
expensive to manage, and difficult to SOCIETAL RISKS ARE ESCALATING All of these five categories of risk carry
recover in the event of a disaster. Electioneering raises the stakes the subsidiary, but highly dangerous,
and could make industrial action risk of reputational damage. Warren
Information on a companys systems is worse, while marches could disrupt Buffet has rightly said, It takes
valuable as advances in analytics make operations. South Africa is not the only 20 years to build a reputation and
it more useful. Its loss represents a country with forthcoming elections, only five minutes to destroy it. An
considerable risk since data is client- and organisations should consider to unmitigated disaster is one way to
sensitive and protected by law. which countries they deliver products achieve that destruction.

34 COVER MARCH 2014

Mar 14.indd 34 2014/03/11 3:25 PM

 When Risk Management Gets
Tough, ERM Actuaries Get Going
...THERE ARE KNOWN KNOWNSTHERE ARE KNOWN
UNKNOWNSBUT THERE ARE ALSO UNKNOWN UNKNOWNS
THERE ARE THINGS WE DO NOT KNOW WE DONT KNOW.
DONALD RUMSFELD, FORMER US DEFENCE SECRETARY

financial crisis, many regulators instinctively turn to ERM actuaries for

have developed, are developing, or assistance, understanding the value
are considering developing game- that an actuary brings to the table.
changing regulations. Helped by ERM actuaries specialise in managing
globalisation and information technology enterprise risks holistically and are
improvements, consumers are savvier trained to handle a wide spectrum of
and more demanding. To top it off, risks effectively, from the knotty and
the competition is unforgivingly cut- technically demanding to the fluid
throat and many companies frequently and qualitative ones. In some sense,
complain about irrational competition. ERM actuaries are multilingual and
Its a dog-eat-dog world, but an can comfortably work across the full
exhilarating world to those who see spectrum of risks ranging from legal
RODNEY MANZANGA opportunities in risk. and compliance through marketing
Business Unit Head of Risk Management
at Aon Hewitt and human resources to insurance and
In a tempestuous business environment
investment risks.
full of unknown unknowns, CEOs can
only have limited confidence in their Faced with a shortage of ERM
In the days of yesteryear, strategies. Not surprisingly, Enterprise practitioners, some companies have
companies used to offer a Risk Management (ERM) has gained engaged with accountants, auditors and
flavour among leading companies. even lawyers. While these professionals
stable portfolio of plain vanilla These companies realise the need do bring something to the table, they
products, with which consumers for more robust risk management generally struggle with technical risks
were generally content. systems to manage interconnected and such as mortality trend risks or risks
unstable risks consistently, effectively associated with financial derivatives, for
detect emerging risks and link risk
The competition was rational, with example. Although some exceptional
management to decision-making. With
nearly everybody practising what individual accountants, auditors, and
centuries of experience in managing
they had learnt in school and from lawyers may satisfactorily assess
risk, actuaries are helping businesses
experience. With no entrenched technical risks, these professionals
navigate the financial, operational and
demands for stable and ever increasing typically encounter formidable
emerging risks through ERM, which
returns, shareholders expectations were challenges because quantification of
effectively offers a holistic framework
reasonable. To put the cherry on the complex risks extends beyond the reach
for managing uncertainty, responding
cake, regulations seldom changed and of their training.
to risk and harnessing opportunities as
financial accounting standards led to they arise.
less volatile financial statements. It was With more moving pieces and
in essence a boring world. The search for higher returns has everything proceeding at a breakneck
resulted in companies offering products pace, seemingly stable risk profiles and
Todays world is very different: it with bells and whistles, entering into sensible strategies can falter, margins
is more exciting and everything is complicated transactions and devising can vanish overnight and with the
topsy-turvy. Economies are more complex structures. While these moves stroke of a pen regulators can erase a
interconnected and more volatile are understandable and arguably profitable market. Moreover, margins for
than ever before. Shareholders have necessary, they result in companies traditional easy-to-understand products
developed a seemingly unquenchable being exposed to less understood risks. are dwindling, and consumers tastes
thirst for high returns, paying a huge As companies frantically search for are more nuanced and skittish. All these
premium for stability and demanding higher returns, some inevitably stray factors murk company risk profiles,
immediate results. Accounting standards from their core competencies. Their lurking in which may be potentially
in many countries require fair value selections of risks are not always astute. existential risks. With known unknowns
principles, leading to inherently and unknown unknowns continually
more volatile financial statements. In advanced economies, insurance threatening to derail company
Perhaps perturbed by the regulatory companies in particular and financial strategies, the case for ERM actuaries
shortcomings exposed by the global services companies in general, has never been stronger.

COVER MARCH 2014 35

Mar 14.indd 35 2014/03/11 3:25 PM

 Technology

Insurance systems and data

The challenges, the constraints and the case for renovation
The complexity and costs of Profitability, not growth, is the holy have succeeded in achieving a single
grail of short-term insurance. This database which carries policy and
IT systems burden short-term
requires balancing the tension between claims data at a granular level. While
insurers. The buzz around data, the push for new business, careful having one database makes sense,
more specifically the intelligent risk selection, and competitive pricing. the requirement for a fast time to
use thereof, has many in a spin Coupled with tight cost controls, the market has resulted in databases being
formula for making money from the developed to support specific products
about its meaning for business. pooling of risk seems simple. or user interfaces.

Insurers in South Africa are constrained Businesses want to account for

by legacy IT systems that are incapable financial and workflow transactions at
of getting new products to market the same level. Hanrus view is that the
quickly to keep up with competitors database structure and the systems
rapidly changing contract features. processing logic have to remain
Workflow costs need to be managed generic and carry data at a cover
and compliance requirements have to level (item/event type e.g. separating
be met. International trends towards the third party liability, fire and theft
increasing regulation have seen components of comprehensive motor
regulatory and compliance risks appear cover, in order to track profitability on
on most insurance organisations risk each component, manage cases where
registers. they attach to different reinsurance
treaties, etc.)
SYSTEMS AND DATA CHALLENGES
Legacy systems are not keeping up The existing systems delivery gaps
with MI, regulatory and compliance should be addressed through an
Alfons van der Vyver, Associate requirements. Theo Vorster said, The architecture that is developed around
Director at KPMG, discussed the problem with IT at most insurers is that a single insurance processing engine
systems challenges and constraints the systems built as recently as five which feeds off and into existing
facing short-term insurers, and the years ago are already too old. systems.
possibilities for renovation, with
Various front-end solutions have been At the centre of the processing layer
Theo Vorster and Hanru Nienaber,
built around specific products, whether should be the application programming
shareholders in Aladdin Software.
for personal business, commercial interface (API) a system without a
Theo is Financial Director at Indequity business or specific policy types. frontend. The API should be highly
Specialised Insurance with 10 years configurable around changes in product
These systems often included logic features. Design should not focus
of consulting experience in the short-
rules at the database or user-interface on product type, but remain generic
term insurance market. Hanru was
level. Recent system developments to cater for all types of insurance
involved in financing transactions in the
around web-based distribution have contracts. It should also be able to
insurance and technology industries via built calculation rules and processing
the Industrial Development Corporation handle aggregates, non-risk covers and
capability around the front-end contingency policies in the cell captive
for five years. He started focussing interface, resulting in various
his attention on the development of environment.
calculation engines and databases in
software for insurers in 2009. the network. The ensuing duplication Hanru highlighted the three most
of implementation costs, running costs important dimensions to an integrated
THE BUSINESS ENVIRONMENT
and licensing fees erodes profitability. insurance system:
The focus areas of any CEO in the
It is clear how these operational
industry, whether of a small, mid-sized 1 Technical capability of the admin
inefficiencies inhibit growth.
or large insurer, are: system to cope with contract
The lead time in system setup for new characteristics and client data.
growing sales and increasing policy
products is problematic. Currently, the
count; 2 Financial ability to record
time to market for new products is
around six months, or even longer. premiums, commissions, claims, cash
cutting costs;
flow and reserving data.
getting better management POSSIBLE SOLUTIONS
The international trend is simpler 3 Workflow it must manage workflow
information (MI) quicker; and
service oriented architecture, built processes and perform analysis
meeting regulatory and compliance around a data, processing, and by division/cost centre/product/
requirements. presentation layer. Few insurers geography/segmentation class.

36 COVER MARCH 2014

Mar 14.indd 36 2014/03/11 3:25 PM

 Global solutions,
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Untitled-1 1 2014/03/11 2:52 PM

 Technology

The ideal frontend system consists when their systems were developed. regulatory requirement is being
of a visually appealing user interface. Opportunities for cost savings through facilitated by STRIDE the Short-
The API communicates to the frontend efficiencies in IT have been missed. Term Insurance Data Exchange, with
what to display and the frontend insurers and binder holders in SA as
content changes automatically when EXTRACTING VALUE FROM DATA shareholders.
the messaging from the API changes. AND BETTER MI
The best management information STRIDE aims to enable compliance
Multiple products could be added is produced by combining the three and to deliver process efficiencies and
because the API has been designed dimensions at the lowest possible cost savings. The risk carrier is able to
around the basic features of an level, i.e. the cover level. This limit binder holders and brokers from
insurance contract. In the API, produces the type of MI that can tell a central point of view. Some of the
different regimes can be configured management how many red VW Polo most toxic books of business in the
to account for different accounting Vivos were involved in accidents on short-term market are operated on the
treatment under different frameworks, any day in a specific geographical basis that the broker writes business in
e.g. IFRS vs US Gaap versus regulatory area and what the loss ratio is for terms of a broad mandate. Providing
basis. each of those policies. A more flexible rating engines and ad-hoc interventions
The cover level should be configured workflow is required. have proved to be fruitless.
to a segmentation class, and technical Theo believes we should explore the The type of system being run by
results should be produced by the
claims processing through rules which the leading direct insurers in the
API, ranging from cover level to
automate certain decisions. That personal lines market revolutionary
segmentation class and up to the
most insurers still have lots to do to a decade ago has become the
overall technical result.
extract value from data gathering, is new requirement. The target market
Sales growth should be driven by web trite. However, when a large short- segment, or the insurers distribution
and application enablement, without term insurer tells you that they dont model, is irrelevant.
large scale changes to the supporting know whether they have exposure
systems. to a specific risk address, e.g. the AN APPROACH FIT FOR MOST
Cresta shopping centre, the challenge There are opportunities throughout the
Hanru said that companies need to becomes clearer. short-term market, and most insurers
use more people who understand do not need to throw everything out.
what the system is supposed to The advance in data gathering, and A gradual move to new architecture
do, than people who know how to accessibility by the risk carriers of and an overhaul of the processing layer
do system programming. C-level policy level data, is a requirement and front-end systems is an approach
executives and heads of business lines under the new Solvency Assessment that could be suitable for most
have been too far from the action and Management framework. This organisations.

38 COVER MARCH 2014

Mar 14.indd 38 2014/03/11 3:26 PM

 EMPLOYEE MOTOR FLEET
AND RISK RISK FINANCE INSURANCE CAR HIRE
BENEFITS SOLUTIONS Paladin INSURANCE
Blue Diamond
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Manwood

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INSURANCE
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EVENTS AND
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each insurance broker and their clients unique solutions provided by dedicated and competent people thats the Centriq difference.

Untitled-1 1 2014/03/11 2:53 PM

 Technology

How technology can help

the insurance industry
and surveying field. This allows for
greater insights into physical risks by a
wider audience almost instantaneously.
This is extremely beneficial, particularly
where overseas insurers and reinsurers
are involved.

Data for statistical modelling is

paramount, especially when one
considers the demands of the solvency
regimes being rolled out. Big data
refers to large and complex data sets
that are statistically more relevant and
rich if managed and stored correctly.
This allows insurance specialists to
understand their risks better and make
more informed decisions.

Business intelligence is the order of GLEN MOLLINK

CEO, Innovation Group
the day. Insurers and brokers will be
Unlike the personal lines better equipped to trend and predict
future scenarios, and to make decisions
insurance market where new and add to the profitability of their
of impending danger. Driver incentive
technologies dominate the sale, schemes for good driving can be a lot
businesses and their clients.
more objective through technology.
distribution and claims fulfilment
Fraud detection and prevention
processes, large commercial and is another opportunity. In some
Vehicle telematics technology is moving
corporate insurance space is still rapidly into other areas. Insurers have
developed markets, including the UK
already found application for remote
about personal relationships and and US, fraud is estimated to account
information gathering on devices such
for over 15% of all premiums in the
interaction. Paper trails and arch as geysers, boilers, and home and
market. Sophisticated technology
lever files are still commonplace commercial alarm systems. At every
can prevent possible fraudsters even
touch point of our modern lives, there
to keep track of correspondence, before a policy is issued. Claims
is an opportunity to gather some
wordings, surveys, invoicing etc. payment and the integrated use of
form of data, which in many cases is
fraud detection and analytics is a
useful for the insurance industry, not
last line of defence to this worldwide
least because risk profiling is gaining
However, technology has definitely pandemic. increasing importance.
entered this market too. There are
Telematics is another buzz word. No These are just a few examples of the
numerous opportunities to collaborate
fleet manager can do without some innovations in technology that are
electronically in a more efficient and
form of telematics system feeding emerging and having a profound impact
effective manner, while not losing
data to a central point regarding fleet on the commercial insurance arena. In a
the personal touch. Cloud computing
vehicle locations, driving habits etc. tough economy, efficiency and superior
technology and collaboration software
The obvious use as theft prevention risk management can be the difference
allow people to share documents
has been superseded by the use between success and failure. Technology
remotely. Such technologies have
of the rich data that can help fleet needs to be embraced and used widely.
enhanced the ability to handle global
managers and risk managers to prevent Many great innovations have been
insurance programmes, reducing the
losses, and run more profitable and inspired through the insurance industry
need to travel as often. Collaboration
software like Skype eases the pain of professional businesses. Vehicle and in the ongoing quest for better risk
conventional telephone and conference driver safety is another important management and reduced costs.
calls, but network speeds and reliability application and if used appropriately,
can cause issues. can save companies substantially in While product distribution is less
the long term. There is even talk of controlled by technology in the larger
Mobile devices for capturing images using fixed objects like traffic lights or commercial space, no doubt in time
and uploading data are more road signs to transmit data to moving this will start to change, as a virtual
commonplace in the risk management vehicles in an effort to forewarn drivers broker or risk advisor perhaps?

40 COVER MARCH 2014

Mar 14.indd 40 2014/03/11 3:26 PM

Untitled-1 1 2014/03/11 2:54 PM
 Technology

o n w i l l f o rce
Digi ta l i s at i m o re a g i le
t o b e co m e
insurers RHYS COLLINS
Head of African
Operations at SSP

Leading international research are looking for vendor services around the selection process, and
and deliverables that can speed up be flexible with deadlines and
group, Gartner, has identified
implementation, which require vendors communication to avoid excluding
digitalisation as one of the to have strong project management vendors that may have the best
primary strategic objectives skills and quality assurance systems. solution but are under time and
for insurers over the next two staffing constraints.
Vendors are under pressure to improve
years. the maturity of their implementation Ensure that digitalisation strategies are
models and other legacy migration not entirely focused on operational
CIOs face significant pressures to techniques, such as re-platforming/ efficiencies and cost reductions. The
deliver measurable business outcomes re-hosting and system upgrades. need for customer centricity is amplified
quickly from their IT investments, but Alternative deployment scenarios, such by the changing consumer trends
the majority of legacy modernisation as application service provisioning around mobility, social networking and
programmes not only present a and cloud computing, should also behaviour, and assessing these changes
significant risk of failure, but often be considered. These options offer is essential in building the right business
lack quick payback delivery potential. usage-based pricing schemes and and IT strategies during the next five to
Insurance IT managers look for metrics, which allow smaller insurers 10 years.
options that enable them to mitigate or organisations with significant IT
risk and deal with shifting customer budget constraints to launch legacy TECH FACTS
expectations and more complex modernisation initiatives. The PwCs 17th Annual Global CEO
relationships with intermediaries. Survey revealed that 86% of banking
Smooth implementation required a and capital markets CEOs believe that
Digitalisation of business processes vendor ecosystem approach with joint technological advances will transform
and models presents a challenge for objectives for solution providers and their businesses over the next five years.
IT managers at insurers worldwide and system integrators. Consider risk-
will remain of paramount concern for reward mechanisms for licensing and These findings were compiled in the
those seeking to remain competitive service contracts, to reduce upfront PwC African Financial Services Journal.
in a dynamic business environment. costs and increase the buy-in of The Journal found that young people
Components to digitalisation are service providers. Use quantifiable and are increasingly turning to social media
technically oriented and focussed on the unambiguous metrics that can serve as for financial advice. PwC and Caceis
transformation of business transactions, the basis for such agreements. Investor Services conducted a study,
and target the generation of new Asset Management in the Social Era,
value propositions for customers or A number of life and short-term insurers which found that of the 100 asset
intermediaries. These present significant are investing funds in core system management groups interviewed
challenges. CIOs and insurance replacement, which is putting strain on worldwide, only 60% actively use
IT decision makers must analyse many vendors resources and their ability social media for marketing and brand
digitisation requirements and aim to to deliver on these implementations. This management. In the United States 25%
implement them before end 2015. climate has caused vendors to be more of adults use social media for personal
selective when asked to participate in finance and investing purposes.
One challenge of legacy modernisation RFIs and RFPs.
projects is the long project cycle.
The initial deployment of a new The vendor selection process should
be streamlined and more targeted as On the flip side, more than
policy administration system typically
requires 12 to 18 months, with follow- it becomes more important to pre- 70% of industry leaders see
on deployments over another year screen and exclude vendors that are cyber security as a threat
or two, until the full implementation a poor match to your organisations to their growth prospects.
is complete. Many insurance CIOs needs. Create a sense of urgency

42 COVER MARCH 2014

Mar 14.indd 42 2014/03/11 3:26 PM

 Global strength

Regional teams

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for moving forward in new, promising directions.

Learn more at www.munichre.com/life

NOT IF, BUT HOW

Untitled-1 1 2014/03/11 2:55 PM

 Coffee with
COVER
Intermediation
pick your partner well
Do you think that technology Transformation is a major issue in
COVER pinned can bring the margins in the the industry, how can we accelerate
down Ian Kirk for intermediary model closer to that of the process, especially in the black
45 minutes to get an the direct model? broker market?
update on his views Yes, I do. At the moment acquisition cost plays The consumer we deal with has changed
a big role in the competitiveness of the direct and so must we. We dont even need to
of the current state model and scale brings that into play. Ongoing look at the score cards. Its a simple process.
of the short-term acquisition cost of the intermediated model We have to bring black intermediaries into
versus advertising cost of the direct model has the business. Santams black intermediary
industry, especially a gap. We need to work with the intermediary development programme takes new
as it relates to and bring value to the client in a more efcient candidates through the whole insurance
way. We must reduce cost with more efciency process and then tries to get them
intermediaries. Ian in uptake, renewal, policy changes and claims. placements. See the value of building
has always been an To this end weve invested in strategic projects diversity into your business and grow people
to create online administration platforms to effectively. Look at your target market and
intermediary man increase our ability to price and underwrite risk how it is transforming, then decide how you
and our conversation as well as to improve service levels and reduce should transform. Diversity is a competitive
costs in the system. advantage.
with him indicates
that he has no plan How can intermediaries emulate
some of the benets clients derive
to change that. from the direct model?
Clever use of technology allows us to service
clients better and faster and be available to
the client all the time. Intermediaries who
dont take advantage of the technology
opportunity will fall behind. Intermediaries
know the challenge they face and are starting
to adapt and be competitive. It is about
adapting effectively.

What can insurers do to assist with

this?
The intermediary is a key component of our
business model. They are there to ensure that
clients are covered properly. We work with
them to stay sustainable. Fundamentally its
about what is in the clients interest. We are
not ogging a dead horse. The model has
value. Intermediary models ensure you get
proper advice, proper cover and claims paid.
We have been able to pay 99% of claims
submitted and the intermediary has played
a role in this. We have a very low repudiation
rate. Policyholder can trust their insurer to be
there for them in this way.

44

Coffee_Mar.indd 1 2014/03/11 2:57 PM

 (1) An understanding of all exposures that
might cause a policy to incur losses;
(2) A conservative evaluation of the
likelihood of any exposure actually causing a
loss and the probable cost if it does;
(3) The setting of a premium that will deliver
a prot, on average, after both prospective
loss costs and operating expenses are
covered; and
(4) The willingness to walk away if the
appropriate premium cant be obtained.
Many insurers pass the rst three tests and
unk the fourth.
Having said all that, both intermediary and
the intermediated insurers certainly have
work to do in order to improve their relative
position.
The rst part of that task is to demonstrate
the value-add of intermediaries in a fast
changing and competitive market. Insurers
and intermediaries need to partner
with each other in delivering expertise
and advice to personal and commercial
policyholders.
We need to work together to reduce the
cost of administration to much lower
levels, wherever possible harnessing
todays technologies. The current
acquisition cost advantage enjoyed by the
direct insurers who have achieved scale is
signicant and represents a competitive
disadvantage to the intermediated model.
At the same time we need to ensure that
our products are accessible and offer value
What is your sentiment around the for money to all consumers, particularly
Retail Distribution Review? in the lower income segments where
intermediaries have tended not to play.
I see opportunity in it. Its quite clear that the
"We must reduce regulatory agenda is part driven by Treasury Intermediaries need to provide quality data
on risk prole and claims experience to
and not just the FSB. It is inevitable and driven
cost with more from the G20. Its an opportunity to rethink enable insurers to price and underwrite
some of the stuff we do and to become the risk correctly, and insurers need to
efciency in more efcient and sustainable. We should specify and use the data more effectively
view it positively. There are areas where we in the underwriting process.
uptake, renewal, could level playing elds and where we could
Clients need to be assisted in the claims
policy changes address things like misleading advertising,
focusing on price only and not value, misuse
process at the time of claim, insurers need
to work closely with the intermediary to
and claims." of loyalty programmes and inducement.
allay policyholders concerns and get them
Smses that read get 50% off your fuel bill if through the pain of a claim event without
you buy my policy have nothing to do with creating uncertainty or confusion.
insurance. Messages like, Are you paying too
It is our view that consumers will always
much, call this number, or, I will reduce your
appreciate good, personal, professional
motor premium monthly forever, are messing
and valuable assistance from intermediaries
up the value proposition and bringing down
and that we will continue to create long-
value of the insurance product in the eye of
term value for the Santam business working
the consumer, in my view.
together with intermediaries.
TCF and RDR should improve the market
The real value in any insurance business is
conditions for the industry as a whole. All our
dependent on its trusted relationship with
interactions with the FSB have been quite
its policyholders, and intermediaries play a
positive. Its too easy to say that the regulators
crucial role in building those relationships
just load us with costs, but there is no sense
with our clients.
in that. It is not the reality. I see the process
as positive, especially in light of the overall
customer awareness shift.

Warren Buffet, a shrewd investor in

insurance, said:
A sound insurance operation requires four
disciplines:

45

Coffee_Mar.indd 2 2014/03/11 2:57 PM

 President Vladimir Putin
Africa
had absolute control over rising
strategic assets, meaning that
cronyism was a real issue

GLENN SILVERMAN
Chief Investment Officer
Investment Solutions

Unpacking the
challenges facing
investors in Russia
A site visit to Russia by a top- underlying economic case for closer
ties between the five members of this
level Investment Solutions
emerging-market group, and what
team has revealed that this lessons there were for South Africa to
partner in the BRICS alliance take from each country.
is one of the richer countries
Politics are interwoven with economics
in natural resources, yet not in Russia, which pose a number
easily accessible for investment of challenges when considering
without strong government investing there. Although this was
not particularly unusual for emerging
connections.
markets in general and the BRICS
Russia was the fourth and last of SAs more specifically, in Russias case, the
BRICS partners to be visited by Chief intrusion is even deeper.
Investment Officer, Glenn Silverman,
and Head of Market and Economic President Vladimir Putin had absolute
Research, Lesiba Mothata. control over strategic assets, meaning
that cronyism was a real issue those
The visits had the clear objective of in his favour are awarded key contracts
determining whether BRICS was just and become wealthy, while those
a jumble of letters or if there was an against him do not.

46 COVER MARCH 2014

Mar 14.indd 46 2014/03/11 3:26 PM

 The blurred line between politics corruption rating not something that Russia has a GDP of US$2 trillion
and economics, along with Putins typically attracts investors. (ranked eighth in the world) and a
supreme control, makes investing in market capitalisation of $874,7 billion
Russia complicated. So, without a Russia is too large and geo-politically (ranked 15th in the world). Of the
good handle on the local politics, in important a country to be ignored. There four countries visited, Russia has the
many of the key sectors, the investor are always opportunities for judicious smallest population at 142 million
needs to be most cautious regarding stock picking. But Russian stocks require (ranked 10th in the world). It has a
investing. a specific, and large, Russian discount rapidly ageing population, with 22,6%
factor, and a more in-depth knowledge of females and 13,8% of males above
Gazprom, the largest (and cheapest) of the country, before doing so, because the age of 60. Its fertility rate of 1,64
conventional gas producer in the basic property rights are often violated. is well below the 2,1 replacement ratio.
world, and many of the State Owned This means Russia faces some real
Enterprises (SOEs), which make up Investing in countries and/or companies
long-term demographic challenges.
some 50% of the market cap of the with deep resources like Russia, Brazil
It is losing almost 1% of its work
Russian stock market, trade on very or even SA, has some merit, but in the
force, almost 900,000 people, every
low multiples. The overall Russian current environment, investors want
year. Few other countries face such a
market consequently looks cheap. growth, and will pay up for such. This
demographic headwind.
is more evident in India, and because
Decisions at the SOEs were often taken growth is in short supply in Brazil and The team will undertake a similar
for geo-political reasons, rather than on Russia, a lower market rating is applied round of interviews, visits and
pure commercial merit. Indeed, among to them. In the case of Russia, a further discussions in South Africa this month.
the BRICS, Russia has the highest corruption or risk discount applies.

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it is to choose the right insurance partner.
Thats why more than half of the Fortune Global 500 companies have chosen Allianz Global Corporate & Specialty
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COVER MARCH 2014 47

Mar 14.indd 47 2014/03/11 3:26 PM

 Africa Rising

Paving the road to success

one BRICS at a time
BY ANNETJIE VAN WYNEGAARD
Glenn Silverman and Lesiba During each trip, the Investment
Solutions team visited more than India has the rupee crisis, and Russias
Mothata prefer to look beyond
20 companies. They have identified currency is under pressure.
the usual investment suspects. what they call national scars in each
They would rather walk the country. These are crucial industries Russia doesnt really have an interest
without which the countries concerned in Africa in terms of business, said
streets and find shares in
will falter. In India it is agriculture, Silverman, but they see BRICS as an
emerging markets. mining in South Africa, manufacturing important construct. The Chinese first
in China, oil and gas in Russia and all invited South Africa to BRICS. From
In March 2012 Silverman and Chris resources in Brazil. a political perspective they view an
Hart, chief strategist at Investment alliance as very important.
Solutions, visited their first BRICS China is a resource absorber, said
country, Brazil, in what has now Silverman, and the Chinese are tough WHAT DOES THIS MEAN FOR
culminated in a two-year research negotiators. INVESTORS?
project, the findings of which will be For value investments, do it in Russia.
captured in a book, set to be launched The way they haggled over prices in Nothing touches India in terms of
in the second half of this year. the informal marketplace in China, stock, as they have 5000 listed shares
made Mothata wonder, How does on their stock market. The markets
Hart accompanied Silverman on the Africa negotiate with China? in Brazil and South Africa are more
first two trips, the second being to difficult, and China has had a 10 year
India in October 2012. Mothata joined Africa needs to be proud, to step up to low in their stock market.
Silverman for the next two expeditions that culture, he said. Every price they
to China in May 2013, and to Russia in offer you is probably inflated by 50%. Its hard work, but you have to go to
October 2013. The way to reach a fair price is to walk understand, said Silverman. You have
away from the deal, sometimes even to be there, smell the smells, eat the
Mothata said it has been an eye- twice, to return to find a reasonable food.
opening experience that has changed agreement.
his understanding of the world. I got
to understand how China looks at In Russia, if you dont have a passport,
Africa. They have a genuine interest in you wont be allowed into the
Africa. He said the past year has made meetings, said Silverman. What lessons for
a life-long contribution to my life and
my career. Russia has an advanced underground South Africa have
railway system with nine million
I am eternally grateful, said commuters using the service daily. The they learned
Silverman. For him the experience has subway is the deepest in the world
been life-changing. His exposure and was built by Stalin to double as from Russia?
to different ethnic groups has shown an underground bunker. Now it is a
him the ingenuity of man and has museum with art and propaganda from Defensive positioning
confirmed his thinking about the the Soviet era. we need to buffer up
environment. Sustainability with in terms of our foreign
regards to climate change has been India is a cacophony of sound, with exchange policy.
accentuated through his trip, and is hooting carrying on through the night.
of great importance to the insurance There are 28 states in India, each one We need to be more
industry. We need to think about very different.
prudent in protecting
these things, he said. the nancial services
On his motivations for initiating the
Mothata recalled how Silverman project, Silverman said, I thought BRICS from brakes and leaks.
challenged him on the Great Wall of were very important, I felt there would
China. Glenn and I were struggling to be important investment opportunities. Nurture the middle
the summit, and he was pushing me class by lowering taxes
Each country has major challenges.
on, mentally and physically. He was and boosting jobs.
Brazil has riots, 6% unemployment and
right there, cheering me on. When
a huge increase in middle class. China
Im 50 or 60 Ill look back on that Avoid nepotism.
has a new premier, new leadership.
moment.

48 COVER MARCH 2014

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 Structure insurance correctly
when moving into Africa
One of the biggest challenges Trouble ensues after a significant loss, ALVIN DYE
with regulators becoming involved and Divisional Executive of Marsh
facing multinationals moving Africas construction division, works
insisting on heavy penalties from clients
into Africa from South Africa to correct their compliance regimen. extensively with clients across Africa
to educate them on the intricacies in
or globally, is their failure insuring in local markets.
Cover for a risk must be arranged
to structure their insurance for the country of origin of that risk,
programmes correctly, which or claims will be paid in the country
leads to a breach in insurance where the policy was arranged. For
example, if insurance is bought in
regulations and the significant
South Africa for a risk in Nigeria, the
penalties and difficulties which claim will be paid to the client in South
can occur thereafter. Africa in rands. This can cause all sorts
of complications around taxation, forex
For global companies with no footprint and accounting balance sheets, and it
in Africa, managing this risk can be a can become a direct contravention of
nightmare as specific knowledge and local legislation.
experience is required.
Large construction players have a good
Africas scale means that the regulatory understanding of the implication of loss
landscape is fraught with different and insuring correctly, but there is a
rules and regulations in each country. need for better education to stop other
Global operations are unaware of the companies from making big mistakes
implications of the non-compliance as they start to trade more extensively
with these laws and regulations. in Africa.

AFRICAS SCALE MEANS THAT THE REGULATORY

LANDSCAPE IS FRAUGHT WITH DIFFERENT RULES
AND REGULATIONS IN EACH COUNTRY.

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COVER MARCH 2014 49

Mar 14.indd 49 2014/03/11 3:26 PM

 Africa Rising

Zambias Luapula
province is ready
for business
For investors who are looking
to expand their opportunities
in infrastructure, agriculture,
mining, energy or hydro power
Luapula province offers real
jewels for partnerships.

These were the views expressed during

the Africa Exchange Country Focus
seminar focused on Zambia that
was recently hosted at KPMGs offices.

Zambia has a growing economy that

for the last four years has relished
an average of 7,1% GDP growth per
annum. The size of the workforce and
the domestic markets for all goods
and services are projected to grow
significantly over the next five to 10
years.

Joyce Nsamba, Deputy Permanent generation, electricity and energy and hydro power development on the
Secretary, said, The growth we have value added raw materials Luapula and Kalungwishi Rivers that
opportunity for the country lies in for investors. We have the Zambia will in time make it easy for investors
its resources, people and markets. Development Agency Act 11 of 2006 to do business in the province.
Zambia is a friendly country with the that is able to protect our investors
Luapula province being one of 10 in interests. If an organisation invests in The relationship between South Africa
the Republic of Zambia and seventh our country for the first five years there and Zambia will enable South African
in size as it accounts for 6% of land is a zero percentage in income tax and investors and even foreign investors
in the country (or 50,566km2). only by the sixth or eighth year will an with operations in South Africa to
Agriculture remains an avenue for organisation be required to pay 50% of become more aware of the vast
future growth. We have good weather the income tax, said Roy Kapembwa, opportunities in Luapula province.
with soils that are rich in minerals that Zambia Development Agency.
can reap all types of food and we do Though South Africa may no longer
not struggle with water as we have one Daniel Rea, Senior Manager, KPMG be viewed as the only gateway to
of the third largest water resources in Zambia, said Luapula Province is investing in Africa, the country still has
Zambia. The investment opportunities a worthy contender to the other a significant role to play in engaging
are rife and include agriculture, mining, nine provinces with investment and facilitating sustainable investment
infrastructure, tourism and fishing, opportunities. Its one of the most through trade relations, said Anthony
to name a few. Our country has politically stable countries in Africa. Thunstrom, KPMG, Chief Operations
sustainable economic development and Investors are starting to realise the Officer for Global Africa Practice.
we aim to have a poverty free province opportunities and benefits to investing
For more information about Africa
by 2030. in Zambias Luapula province.The
Exchange and upcoming country
Luapula province is unleashing its
Zambia has promising economic focused seminars, please visit: http://
potential with a solid GDP and projects
prospects and major opportunities www.africaexchange.co/homepage
like improved roads connections under
in priority sectors in tourism, power the Link 8000 project, and significant

50 COVER MARCH 2014

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 On-going strategies to
limit IFF from Africa
IMARA, INVESTING IN AFRICA Africa. The US visit will give the Panel an Bank experts said it was important that
opportunity to draw on the experience of the Panel and developed governments
Efforts by the High Level Panel (HLP) US authorities who have been engaged in worked together at creating a coalition
on Illicit Financial Flows (IFF) from fighting money laundering, one important of support to curb IFFs at both the
Africa to curb the outflows that have component of IFF. We want to draw origin and the destinations of the illicit
crippled Africas efforts to sustain on your experience to find practical and outflows. Mutual accountability is
economic growth and develop over the practicable solutions in our efforts to important. This could be achieved by
last decades, received support from help African governments curb IFFs, said leveraging with global dialogues taking
Assistant Secretary of State for African Mbeki. place internationally, they said. Experts
Affairs, Linda Thomas-Greenfield, from the IMF welcomed the work being
according to a UN press statement. The Panel held meetings with done by the HLP and encouraged the
representatives from the World Bank Panel to identify factors in the broad
In a meeting with the Panel led by its and the International Monetary Fund, context of IFF, which would make Africa
Chair, former South African President two institutions that have been working more attractive to FDI.
Thabo Mbeki, Thomas-Greenfield said with African policy makers to develop
that the US and the African continent capacity-building programmes in the The HLP was established by the Joint
had a shared responsibility to curb illicit fields of assets tracking, tax evasions and African Union Economic Commission
financial flows and illegal activities in revenue management on the African for Africa Conference of Ministers
Africa. continent. Representatives of the World of Finance, Planning and Economic
Bank underlined the importance of Development and inaugurated in
The US Department of State is capacity building at government level. February 2012 in Johannesburg. The
committed to the success of your efforts. Panels mandate is to address the
The work that you are doing is important, One of the main lessons we have learned debilitating problem of IFF estimated
as curtailing the illicit outflows from while working with African governments at USD 50 billion a year, which are
Africa would have a dramatic impact in is that there are huge capacity issues, reflected in statistics such as, for
boosting development initiatives. Similar said Mokhtar Diop, the Banks Vice- example, the fact that SSA countries
sentiments were echoed in high-level President for Africa. This leads to still mobilise less than 17% of their GDP
meetings held with representatives of the inequity of negotiations between African in tax revenues, below the minimum
US Treasury. The HLP had been meeting governments and powerful multinational level of 20% considered necessary
with US officials to raise awareness about companies. Capacity building, public by the UN to achieve the Millennium
the scale, manifestations and effects finance and procurement management Development Goals.
of illicit outflows on the economies of would help improve matters.

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 4th African Insurance Distribution & Bancassurance Conference

In March this year COVER is hosting its fourth African Insurance Distribution
and Bancassurance conference in Ghana and Kenya. These region-specific
satellite seminars have helped COVER build good relationships in East and
West Africa. Coface and the CIA World Factbook, along with multiple online
sources, helped us gauge a broader understanding of these regions.

Did you know?2

Ghana, the Singapore Ghana became the first sub-Saharan
of Africa, at a glance: country in colonial Africa to gain
its independence in 1957. Ghana
Capital: Accra was formed from the merger of the
British colony of the Gold Coast and
Currency: Ghana cedi the Togoland trust territory.

Population: 25,37 million Location: Western Africa,

bordering the Gulf of Guinea,
(2012) World Bank
between Cote dIvoire and Togo.
Continent: Africa Climate: tropical, warm and
comparatively dry along southeast
President: John Dramani
coast, hot and humid in southwest,
Mahama hot and dry in north
Official language: English Resources: gold, timber, industrial
Language diamonds, bauxite, manganese,
fish, rubber, hydropower, petroleum,
Points of interest: Kakum silver, salt, limestone
National Park, Lake Volta, etc.
Population: ACCRA (capital) 2,269
million; Kumasi 1,773 million (2009)

Major Macro Economic Indicators1

1
Coface http://www.coface.com/Economic-Studies-and-Country-Risks/Ghana
Environmental issues: Recurrent drought
2
CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/gh.html in north severely affects agricultural
Friendly commercial farming in Ghana activities; deforestation; overgrazing; soil
World Bank: Ghana: http://www.worldbank.org/en/country/ghana erosion; poaching and habitat destruction
Stats Ghana: http://www.statsghana.gov.gh/economic.html
Ghana web: http://www.ghanaweb.com/GhanaHomePage/economy/statistics.php threatens wildlife populations; water pollution;
inadequate supplies of potable water

52 COVER MARCH 2014

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 The Republic of Kenya Interesting facts:
After coffee, Kenyas biggest
income generator is tourism.

Kenya first obtained her Some of the oldest known

paleontological records of mans
independence in 1963, history have been found in
under the leadership of Kenya. Around Lake Turkana, a
fossil known as Kenya Man was
Jomo Kenyatta. dated at 3,5 to 3,2 million years
old.

Kenya from a distance: Kenyas Great Rift Valley was

Population size: 43,18 million (2012) formed around 20 million years
ago, when the crust of the Earth
Currency: Shilling was split.
Gross National Income (GDI): Kenyan environmentalist
$10,657,900,000 Professor Maathai won the Nobel
Peace Prize in 2004. She was the
47,2% urbanisation predicted by 2015
first African woman to do so.
Kenyas economy is largest in East
Total expenditure on health as %
Africa
of GDP: 4.5
The two official languages in Kenya
are English and Swahili, although there
are dozens of other languages spoken
Major Macro Economic Indicators7
in various parts of the country.

Environment:
Located in Eastern Africa, between
Somalia and Tanzania.

The Kenyan Highlands comprise one

of the most successful agricultural
production regions in Africa glaciers
are found on Mount Kenya, Africas
second highest peak, and unique
physiography supports abundant
and varied wildlife of scientific and
economic value 1
CIA world fact book https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html
4
Nation Master http://www.nationmaster.com/country/ke-kenya/peo-people
68 areas under environmental 5
http://www.sciencekids.co.nz/sciencefacts/countries/kenya.html
protection 3
CIA world fact book
7
Coface http://www.coface.com/Economic-Studies-and-Country-Risks/Kenya
8
As above
9
http://www.travelingeast.com/africa/kenya/ten-interesting-facts-about-kenya/
10
http://travel.nationalgeographic.com/travel/countries/kenya-facts/
11
World Health Org http://www.who.int/countries/ken/en/

Strengths
Kenyan exports: Tea,
Strategic position between West Africa
horticultural products, coffee,
and East Africa
petroleum products and fish
Pivotal role in East African community,
Barriers to growth include:
leading African common market Weaknesses
high population growth,
Diversified agriculture (maize, tea, Agricultural production highly electricity shortages and
coffee, horticulture) dependent weather conditions inefficiency in certain sectors.

Good telecommunications and Inadequate infrastructures hinders In terms of sports, Kenya is

financial services economic development perhaps best known for its
middle distance and long
Lively demographics and emergence Widespread poverty distance runners, with the
of a middle class country frequently producing
Governance improving but persistent Olympic champions.
Adoption of a new constitution corruption

COVER MARCH 2014 53

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 Lion of Africa Insurance
streamlines its business operations
After months of preparation, Lion of
Africas new structure is now in place. It
has been built around Gauteng as the hub
of its business, and has been based on the
delivery of superior services to its clients.
Adam Samie, CEO at Lion of Africa Insurance, says
that the change has created many exciting business
opportunities for all their stakeholders by placing more of
Lion of Africas specialised staff members in the front line of
service to its business partners.

Samie says that Lion of Africas business is now built

around the provision of key services to its selected broker
partners through its staff and great IT support services.
Our primary focus is to ensure world class services to
our brokers who have a regional or national footprint and
have diverse and complex portfolios.

Our structure has undergone considerable change

to accommodate this single focus. The creation of an
integrated sales and underwriting team for the different Meet some of Lion of Africa Insurance leaders
market segments has the effect of making our entire team Property business: Anwa Adams
market facing. This makes the underwriting technical team Marine business: Carmen Pasqualle
much more accessible to our brokers and clients and is Marketing: Rethabile Mahuma
expected to make the development of superior insurance
solutions for our clients a lot simpler, explains Samie. Gauteng
Corporate business: Shelton Siwedza
Another key part of Lion of Africas strategy is the opening Local authority business: Pride Choruma
of its client service centre in Johannesburg to ensure that Pretoria: Regina Thomo
80% of all administrative underwriting and claims enquiries Johannesburg: Steven Isaacs
are attended to in real time.
KwaZulu-Natal
The service centre is intended ultimately to manage new Martin Grove
claims reporting and enquiries through enhanced reporting
standards that ensure that customer service lies at the Port Elizabeth
heart of its business. Sally Robertson

We are excited about the new structure and our teams Western Cape
are raring to show our clients that a new breed of insurer Priscilla Gross
is on the prowl, adds Samie.
Lion of Africa is rst insurance company in South Africa Claims
to achieve a Level 1 Broad Based Black Economic Fieez Abbass
Empowerment rating in terms of the BBBEE Act of 2003 Bridget Alexander
and is a wholly owned subsidiary of The Lion of Africa
Holdings Company (Proprietary) Limited, owned by
Brimstone Investment Corporation Limited, a broad based
black investment group listed on the JSE.

Lion_Mar_Corrected.indd 1 2014/03/11 2:58 PM

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 Investing for
CHILDREN
The German Protestant theologian Dietrich Bonhoeffer said, The test of the morality of a
society is what it does for its children. South Africa still has a long way to go before our
treatment of children, and the elderly for that matter, can establish us as a moral society.
What we see on our streets and read in our newspapers are stories of children being left
out in the cold. As global economic and political uncertainties persist, many clients are
approaching their financial planners for advice on how to ensure their childrens financial
wellbeing. What if something happens to parents or breadwinners, or if political issues
challenge accumulated wealth? COVER asked industry leaders in estate planning for their
thoughts on this tender issue.

56 COVER MARCH 2014

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 Investing for Children

Making and protecting

investments for children
Risk management and Selecting the age at which capital
distributions can be made to the trust
protection are buzz-words you
beneficiaries is an intensely personal
hear often nowadays. You issue and needs careful thought.
know your clients worry about Limiting the discretionary powers
giving their children the best of trustees is generally unwise.
What is vital is to ensure that the
chance in life, but how do you testamentary trust has adequate

ON THE
as a financial planner advise cash to meet ongoing expenses such
them? as rates, insurance premiums and
maintenance of properties. Providing
The risks of life are painfully guidelines regarding the risk level for
investments and other information

LOOSE!
obvious, but what about traditional
ways of structuring and protecting regarding family members, which
investments? In a world changing the trustees might find useful, may
as fast as your tablet screen, do the be done by way of a letter of wishes
familiar methods still apply? addressed to the trustees.

The life industrys role in covering One of the areas where our law
premature death of a parent or has failed children is the lack of
guardian who is the breadwinner is protection for the proceeds of life
crucial. Death, disability and serious policies that are payable directly
illness cover is still the first and most to minor children. These life policy
important building block. Making lump sums do not have to be taken
investments which will not only up into the Guardians Fund, but may
protect ones capital against political be paid to the childs surviving parent
and currency risks, but also grow or legal guardian. There have been
those investments at a rate well many cases where those responsible
above inflation, is the second vital for administering such monies have
building block. In recent months, squandered them. To counter this, it
equity investments in rand-hedge is best for the beneficiary of such life
shares have demonstrated, quite policies to be a trust.
spectacularly, the importance of
Ensuring your clients wills and trusts
diversification of investments into
are properly drafted and administered
strong currency stock markets.
is one of the best ways they can
Your clients last will and testament provide their children with financial
is another essential building security.
block. Their executor needs to be
competent, well-staffed, and have
a solid working relationship with
the Masters office. Providing for
a minor childs inheritance to be
held in trust is essential, otherwise
it will be taken up into the state-
controlled Guardians Fund. The
Fund pays only a nominal interest
and no capital until age 18, resulting
in an erosion of buying power. A
competent, professional trustee
should be appointed to manage the
childs inheritance. Such a trustee
should have ready access to legal,
taxation and property experts, ideally
in the same firm. Such a trustee is
best placed to make those decisions
which your deceased client would
have made. CLIVE HILL,
Legal Advisor, Sanlam Trust

COVER MARCH 2014 57

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 Investing for Children

The costs of education

One of the most important based investment offer significant
advantages when compared to a
goals parents can save towards
traditional education policy.
is their childrens education.
South African university fees are An endowment plan allows an investor
to set up regular debit orders or to
between R35,000 and R55,000 set aside a lump sum for a fixed
a year most parents will need investment period (a minimum of five
to save in advance. years). Only one withdrawal is allowed
during the initial investment term,
Costs are likely to escalate by the time aiming to ensure that savings remain
younger children matriculate. Lets set untouched and exposed to growth
the annual cost of a mid-range, four- opportunities until they are needed.
year degree at R60,000 per annum Investment returns are taxed at 30%
for tuition fees, learning material and within the investment and investment
living expenses. Assuming a constant proceeds are tax-free in the investors
inflation rate of 6%, this annual cost hands. This presents a tax advantage
estimate could jump by close to 80% for investors with a marginal tax rate of
in 10 years. over 30%.

For an investment, weve assumed

annual investment growth of CPI+4%
and, if making monthly contributions,
an annual debit order escalation rate of
6%. For a study loan, weve assumed a
borrowing rate of 10% over four years.
Inflation has been kept constant at 6%:
Children just starting school are A discretionary unit trust investment
expected to pay roughly R430,000 offers more flexibility. Investors choose In this example, the investor stands to
towards tertiary education when they the amount and frequency of their save most by investing an appropriate
matriculate. Children who have entered investment contributions, but can lump sum as early as possible. If
high school this year are expected to decide for how long they want to such a large amount is unavailable,
pay R320,000 in tertiary education invest and can make withdrawals from breaking the required capital down into
fees. their investments more freely. This manageable debit order investments
type of investment could be considered could result in a significant saving over
Advise your clients to start saving early by investors with marginal tax rates time.
to draw maximum advantage from of lower than 30% (as no special tax
compounding returns. Your clients will treatment applies) or who require Ultimately, it would be worth
eventually put away less than originally more flexibility to make potential considering setting university savings
anticipated. withdrawals. aside well ahead of time.

They could choose between a A second alternative would be to

structured investment vehicle such as finance the costs of tertiary education
an endowment plan, or a more flexible by means of a loan. However, interest
discretionary investment product. In charges will result in your clients paying
both instances, the low investment more than they originally borrowed.
minimums required and the cost
savings associated with a unit trust This is illustrated below.

HUGO MALHERBE,
Product Development Manager,
PPS Investments

58 COVER MARCH 2014

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 Secure your childrens
financial future with a will
Sadly, only 55% of South The guardian must apply to release
the money for maintenance (like

TAKE
Africans have faith in the education). The maximum amount
economy, according to the Old is currently set at R100,000 a year,
Mutual Savings and Investment irrespective of the amount in the fund
for that child.
report released in July 2013.
This is on the back of the STEPS TO ENSURE YOUR ASSETS

COVER
ARE SHARED FAIRLY
rising costs in our day-to-day Decide how you would like your
expenses, not to mention the estate to be shared and managed
exorbitant cost of education. after you pass away. Would you like
it to be given to your beneficiaries,
But we want the best for or held in a trust and used to
our children and that means generate a regular income for your
ensuring that they are taken children?

care of if we are no longer Specify in your will your childrens

around. guardian and request that the
guardian be exempt from having to
You cannot assume that when you provide security.
die, your estate will simply be handed Determine whether you would like
over to your children. You need to do any benefit to be held in a trust
an estate plan and complete a will until the minors reach the age of
to ensure that necessary provision is majority, or any other age that you
made for you and your family, both would like to specify.
while you are alive and after you
have passed away, and to ensure that Ensure that there is enough cash
your estate is distributed according or liquid assets left in your
to your exact wishes. Where minors estate. This could be actual cash,
are concerned, make provision for or better still, a life policy. This
inheritance to be placed in a trust. ensures that all costs related to the
administration of the estate, such
WHAT HAPPENS WHEN YOU as funeral costs and any amounts
DONT HAVE A WILL? owing to SARS and other creditors,
If you pass away without a will, your can be covered. Without liquid
estate will be divided according to assets you may need to sell other
the Intestate Succession Act and assets, like the house, to settle
not according to your wishes. The these expenses and debts.
law will decide the heirs to your
estate without taking any personal
circumstances or wishes into account.

Where a child has been identified as

a minor, the Administration of Estates
Act says that the natural guardian of
the child can get the inheritance on
that childs behalf. It also says that no
money is to be paid to the guardian
unless an amount equivalent to the
inheritance is provided to the Master
of the high court as security.

If the guardian cannot provide

security, the minors (cash) inheritance
is to be lodged with the Guardians
Fund until the minor reaches age of TRISTAN NAIDOO,
Legal Advisor Specialist
majority, which in South Africa is 18.
at Old Mutual

COVER MARCH 2014 59

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 Investing for Children

Saving for education

Education is just like any other goal. The subtle
difference comes in with the emotional connection
that we have with our children and the drive to
do what is best for them. So although we may
sometimes settle for second best, this is not the
case when it comes to our childrens education.

Few people can afford a quality education by simply paying

out of their monthly salary. A structured savings plan takes
all the risks into consideration and will help your client build
an education fund over a period of time that will reduce the
amount they take out of their salary.

The basic process to follow when planning for education is

as follows: NICO-LOUIS MINNIE,
Head of Investments,
Liberty

WE OFTEN DEFINE
INVESTMENT RISK AS THE
POSSIBILITY OF LOSING MONEY
DUE TO MARKET VOLATILITY.

IDENTIFY THE NEED

Define the current cost of education and add inflation to
future-proof the provision. Education inflation generally
outstrips the Consumer Price Index (CPI) and over the last 10
years the average education inflation was 9% compared to
CPI of 6%. This makes the next step in the process so much
more important since your return profile will need to allow
for an additional 3% performance requirement relative to
CPI.

DEFINE YOUR TOLERANCE FOR RISK

We often define investment risk as the possibility of losing
money due to market volatility. However, the flipside of
this is often overlooked where a client takes on too little
investment risk and ends up not achieving the required moderately aggressive to aggressive portfolio. For example
return. This is especially relevant when saving for education if your client needs to save R50,000 in todays money over
due to the high rate of inflation prevalent in that industry. the next seven years, the monthly contribution would have
to be R770. This is based on an annual return of 10% and
The chart, right and above, shows how the main market education inflation of 9%.
indices stack up against education inflation over the last 13
years. From this it is clear that you have to invest in assets REVIEW THE PLAN ANNUALLY
that are more risky (in the general sense) to consistently Reality often turns out different to theory. Revisit the
beat education inflation over the long term. above process on a regular basis. At this stage client may
indicate that they require risk cover in addition to the savings
CALCULATE THE REQUIRED MONTHLY CONTRIBUTION element outlined above or that the monthly contribution
Step one gave us the cost of education and since we can is too high. Following the same process to rebalance the
add education inflation to this we can do a basic calculation investment will allow you to consistently provide your clients
to find the required monthly contribution based on a with the best advice for their unique needs.

60 COVER MARCH 2014

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 Education
makes kids self-
sufficient for life
COMING
Education is an investment The company has launched the
Iteke Learnership Programme, in
that mitigates economic
which qualifying beneficiaries are
uncertainty. able to spend one year at FedGroup,

THIS
gaining work experience and being
Although Section 29 of the South mentored through the acquisition of
African Constitution stipulates a tertiary qualification in business
that everyone has a right to administration.
basic education and that the
right is immediately rather than Even one extra year of study gives
progressively realisable the cost of a young person an edge in the race

MAY
education often impedes that right for jobs. Gaining work experience as
in the case of minor children whose well as absorbing workplace culture
breadwinning parents have died. not only give them insight into
possible careers but make them more
This is where the life insurance attractive to potential employers.
industry, in the form of beneficiary
funds, must play an empowering FedGroup has employed one of its
role. It is not enough for beneficiary former beneficiaries, Brinny Mphogo,
fund trustees to ensure that funds for to head up Iteke. The son of a
a minor child are used to house and brick layer and a domestic worker
feed the child adequately. who could not afford to send him

Serving the best interests of the child

should also entail equipping him
to university, Mphogo graduated
in 2013 with a BCom in corporate
communications and is currently
TO A VENUE
NEAR YOU
or her to break out of the cycle of reading for his honours.
poverty by seeing that he or she gets
a basic education. Because an organisation saw the
potential in me and chose to invest
A report from Solidarity Research in me, I was the first member of my
Institute shows that 18% of people family to obtain a degree, he says.
under the age of 30 who have Go to www.altrisk.co.za/takecharge
Growing up, I was faced with two
matriculated earn more than R6 400 decisions. One: roll with the punches
a month. Of those who go on to get and see where the wind takes me,
a tertiary qualification, 68% earn two: shape a future for myself. I
more than R6 400. chose option two. All I needed was
the support FedGroup gave me. The
Clearly, education confers an
rest was and still is up to me.
advantage in the workplace, and
more to the point, it equips children
to become self-sufficient adults.

With this as an objective, FedGroup

has managed beneficiary fund
monies for 22 years to ensure that
thousands of children completed
their schooling. Where feasible, the
company pays for school fees and
uniform, stationery, and computer
supplies directly, guaranteeing that
an appropriate proportion of the
beneficiary amount due to each child
is used towards education. In 2013
alone, the company managed more
than R12 million in education-related SCOTT FIELD,
expenses. Chief Financial Officer,
FedGroup

COVER MARCH 2014 61

Altrisk is a division of Hollard Life Assurance, an authorised
nancial services provider (FSP 17697).

Mar 14.indd 61 2014/03/11 3:28 PM

 Investing for Children

The benefits of
beneficiary funds
Many parents with small children An account will be set up for your their capital in the beneficiary fund to
child in an umbrella beneficiary fund. help pay for their tertiary education or
make provision in their wills for
Depending on the childs age and buy a car.
a testamentary trust to be set up circumstances, an amount will be paid
in the event of their death. This to the childs guardian as a monthly Because of their umbrella structure,
income for the childs subsistence. members of beneficiary funds benefit
is so that assets can be received from economies of scale. In addition
Then, on request, the beneficiary fund
in the trust and managed by will make capital payments, such as for there are tax advantages. All death
trustees in order to maintain school fees and medical costs. benefits are taxed according to the tax
sliding scale for death benefits in the
and finance the childs education
In our experience at Fairheads, around hands of the deceased. Once paid into
until he or she turns 18. 70% of the monies in the beneficiary the beneficiary fund, the amount is
funds administered by us are used to tax-free throughout and also tax-free
Other parents may choose to take out pay for childrens education. at the time of paying out.
extra insurance on their life policy to
provide for education fees to be paid in If you should pass away while you
the event of death. are still employed and if you have
stated on your nomination form that
A beneficiary fund is another option the trustees consider the use of a
available to members of retirement beneficiary fund, they will ascertain
funds. who your dependants are and, in their
discretion, allocate the death benefits
These funds are strictly regulated
accordingly.
under the Pension Funds Act and were
created by the government in 2009 to Once assets are paid into a beneficiary
ensure the protection of minors assets. fund, the trustees of the beneficiary
Specifically, beneficiary funds are fund take over the fiduciary
designed to accept lump-sum death responsibility from the retirement fund
benefits from your retirement fund trustees. The investment management,
should you die and leave behind minor which is outsourced to reputable asset
dependants. managers, is largely conservative, yet
tailored to each child depending on
How it works is that if you are a
their age and circumstances.
member of a retirement fund, you have
a right to state on your beneficiary At 18, the child is entitled to the
nomination form that the trustees of remaining capital in the beneficiary
the retirement fund consider the use of fund. We offer advice to these young RICHARD KREPELKA,
a beneficiary fund. adults, some of whom choose to leave Fairheads Benefit Services

62 COVER MARCH 2014

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 WHAT THEY SAID
ABOUT EDUCATION:
Education is the most powerful weapon
which you can use to change the world.
- Nelson Mandela

I have never let my schooling

interfere with my education.
- Mark Twain

My mother said I must always be

intolerant of ignorance but understanding
of illiteracy. That some people, unable to
go to school, were more educated and
more intelligent than college professors.
- Maya Angelou

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COVER MARCH 2014 63

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 Investing for Children

Fintech invests in educating

future chartered accountants
track record of developing young minds
and growing them into responsible,
balanced adults who can contribute to
the economy of their country. To date
2 500 students have been supported
by TBF in the last 10 years. The success
of the programme depends on the
generosity of donors such as Fintech
who share the vision of developing
chartered accountants to not only
address the shortage but to also address
transformation within the sector, said
Nthato Selebi, Project Director at the
TBF.

Education costs money, but then so

in the end does ignorance. Without
the support from our donors, this
skills development and transformation
programme would not have been
successful. Above all, it is not about the
successes of the programme it is about
changing peoples lives, and through
them changing the fortunes of the
nation, he continued.

Fintech are committed not only to

providing companies with the finance
The chartered accountancy universities on special undergraduate
they require to develop and grow, but
BCom Accounting programmes. This
profession in South Africa show this same commitment to assisting
includes the development of life skills
is facing a skills shortage. in the development on the South African
and workplace readiness skills.
economy through educating our youth to
Education and skills development enter and strengthen our financial sector.
Fintech recognises the need for
is vital for South Africa to Corporate Social Responsibility (CSR) For more information on the Thuthuka
become globally competitive. which enables socio-economic Bursary Fund, please visit
Bearing this in mind, Fintech are transformation and continues to support www.saicacsi.co.za
the TBF as we want our CSR initiative
committed to continuing their
to be more than a scorecard box-ticking
support of the Thuthuka Bursary exercise. Being in the financial services
Fund (TBF). Fintech initiated industry, it made sense for Fintech to
their contribution to the TBF, a support this SAICA initiative. For CSR to
be effective, it needs to speak directly to
bursary fund administered by both the strategic intent of the company,
the South African Institute of and to real and measurable social returns
Chartered Accountants (SAICA), that are relevant to the business, said
Glen Christopulo, CEO of Fintech.
in 2009.
Since its inception in 2005, the TBF
TBF was created with the purpose of programme has produced 95 students
allowing disadvantaged students to who have passed Parts one and two
realise their potential as prospective of the Qualifying Examination, bringing
chartered accountants. In 2005 the them one step closer to qualifying as
first intake of students started their a CA(SA). Of these students, 46 have
university studies and achieved and registered or are in the process of
incredible 93,5% average pass rate. registering as a CA(SA), while 49 only
The programme aims to place between have to meet their training obligations.
200 300 black and coloured ELLEN EDWARDS,
With some 1 500 students currently on Head of HR and
students annually at selected accredited the programme, the TBF has a successful Marketing at Fintech

64 COVER MARCH 2014

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 Anyone can invest
on behalf of a child
Beneficiaries of the Fundisa unit As long as there are enough funds the
bonus, funded from the government
trust fund had their benefits
and private sector contributions, will be
boosted by a record bonus allocated annually to beneficiaries who
payment of R6,3 million in 2013. pass the means test.
The bonus payment was shared For investors who invested in Fundisa LEON CAMPHER,
among 24 997 beneficiaries from before 1 March 2013 for beneficiaries CEO of ASISA
low-income families. who fall outside the means test, the
annual bonus payments will continue
Fundisa is a public/private sector as long as there are enough funds, but
partnership between the Department from grant money sourced from ASISA
members. FUNDISAS ASSETS UNDER
of Higher Education and Training, the
National Student Financial Aid Scheme MANAGEMENT GREW FROM R93,8
(NSFAS) and the Association for HOW THE BONUS GRANT WORKS MILLION IN 2012 TO R132,4 MILLION
Savings and Investment South Africa Investors in the Fundisa Fund have the
benefits of their chosen beneficiaries AT THE END OF NOVEMBER 2013.
(ASISA). The five-year old initiative
aims to encourage South Africans enhanced by 25% every year to a
to save for the higher education of maximum of R600 per learner. So
children from low-income families. if you save R200 each month for
a beneficiary from a low-income
Fundisas assets under management household for 12 months in the A minimum investment of R40 is
grew from R93,8 million in 2012 to Fundisa Fund, you will see the R2 400 required. The investor can then choose
R132,4 million at the end of November investment grow by R600 to R3 000. to pay R40 or more every month or
2013. The fund attracted 3 302 new Furthermore, the R3 000 will also top up the investment when money
investors over this period who are share in the overall investment return becomes available.
saving towards the education of 4 377 achieved by the fund in the next year.
beneficiaries. An annual fee of no more than 1,25%
WHAT IS FUNDISA? (excl VAT) applies, which is taken
Fundisa introduced a means test for The Fundisa Fund is administered by from the return earned on the money
beneficiaries at the beginning of March STANLIB. The underlying portfolios, invested. Companies offering the
2013 of an annual household income of which invest in bonds, fixed deposits Fundisa fund can discount this fee.
R180 000 or less, which only applies and other interest earning securities, A maximum initial fee of 3% (excl
to the families of the beneficiaries and are managed by selected asset VAT) may be charged, but only if the
not to the investors, to ensure that managers. investment is made with the help of an
high-income earners can invest on independent financial advisor. Fundisa
behalf of children from low-income The Fund is open to investors wanting is available from Standard Bank,
families. to save for the higher education of a Nedgroup Investments, and ABSA.
South African citizen or permanent
2013 BENEFITS resident who comes from a household More information is available from the
All parties agreed that this should be a earning R180 000 or less a year. Fundisa web site at www.fundisa.org.za.
low-risk investment, and Fundisa was
launched as an interest bearing short-
term (previously fixed interest income)
unit trust fund of funds.
The following bonus payments were distributed over the past four years:
Each beneficiary benefitted from the
5,2% average return achieved by the
Fundisa Fund for the 12 months to the
end of November 2013.

This translates to a total return of

30,2% for 2013 on the first R2 400
the maximum amount that qualifies
for the bonus payment, provided no
withdrawals are made during the year.

COVER MARCH 2014 65

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A Renasa:
B C D E F G
Investing for Children

BONNY LOUREIRO
General Manager

Helping
RITE at Renasa Insurance
Company Limited

kids to
read and
RITE
Renasa Insurance Company The burden on the government to We train, motivate and inspire teachers
fix the broken education system is to try new and innovative methods of
believes in giving back. RITE
overwhelming. Almost 80% of the teaching and fun ways to engage the
is Renasas social responsibility 27 000 schools in the country are children to experience and learn. The
initiative, and we have dysfunctional. There are fewer than set of Grade 1 readers that RITE has
earmarked education as our area 6 000 properly functioning schools. All written and produced are currently
citizens and South African businesses being used in needy schools across
of concern. need to support schooling. Gauteng and KZN. These readers
support the curriculum taught in
Development of human capital is a We cannot underestimate the schools and cover the Foundation
pre-condition for society to achieve importance of learning to read and Phase concepts of colours, shapes,
sustained economic growth. Such write. We often assume that simply counting, spatial awareness, degrees of
development requires investments in because everyone must learn these comparison, family, and much more.
education, training and healthcare. skills in order to function in our society,
Our focus is at the grassroots level: they do. The reality, sadly, is different. RITE is passionate about children
the Foundation Phase of education. learning to read and write. The extra
This phase is fundamental for nurturing We believe no one should be denied reading material we provide will go a
cognitive capacity, literacy, numeracy the right to learn these skills. RITE long way in helping achieve our goal
and the ability to communicate. has bought the rights to the Alphaland of improving literacy levels in South
Literacy Programme and has already Africa. Businesses spend millions
South Africas schooling system is donated it to over 250 schools in past each year on interventions in schools.
performing poorly by international years. RITE extends its reach through And while this may be small money
standards. The problem is poor the RITE Reader Project. We have compared to the annual education
quality: of teaching, of governance written and produced readers, and now budget, funding for important select
and, critically, of the intellectual donate packs of 110 readers per class projects can make a real difference.
development and basic competence of to each teacher that attends our RITE
students (even those who complete workshops. Renasa is proud to be one such
the full 12 years) when they exit the insurance business that is giving back
system. to society.

66 COVER MARCH 2014

Mar 14.indd 66 2014/03/11 3:29 PM

 DONT GET BURNED BY RISK.
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Untitled-1 1 2014/03/11 4:00 PM

 Takaful

Taking Takaful
abroad in Africa
Last years Global Takaful Insights report by E&Y
estimates that Africa has only contributed 5% to the
global Takaful business in 2012. Marcel Papp, Head
of Retakaful, Swiss Re, tells COVER readers how
Takaful can be increased more in the continent in
the coming years?

One important factor is governmental support. Takaful is

different from conventional insurance and this should be
reflected in the insurance regulation. Thereby, one common
way to encourage the development of a local Takaful
industry is to have lower minimum capital requirements
for the establishment of a Takaful operator compared to a
conventional insurer.

It is also necessary to have specific Takaful regulation in order

to avoid abuses and misrepresentations from companies which
claim to follow the principles of Takaful but in reality offer
conventional insurance.
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Such regulation also helps the public and business to gain

trust in the Takaful system. Therefore, it is good to see
that Nigeria and Morocco have recently come up with
Takaful regulations. Hopefully other African countries such
as South Africa will soon follow.

Another key factor in the growth of Takaful is awareness

creation and education of the public. Takaful is a multi-
faceted product with various value propositions which
are partly different from insurance. Therefore, dependent
on the customer, different aspects have to be promoted
such as the religious aspects (e.g. Hereafter-benefits)
for Muslims, the surplus sharing feature for Non-Muslims
or the ethical and mutual aspects of Takaful for all
clients.

In order to do so it is necessary for the sales people

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 Working with
WHEELS

Compulsory third party

insurance is a must
Research from the South In the UK, new legislation introduced
in 2013 mean that it is also now an
African Insurance Association
offence to keep an uninsured vehicle,
(SAIA), which is currently rather than to drive when uninsured.
in consultation with the Records at the Motor Insurance
government to reinstate Database (MID) will be compared
with those held on the DVLA Vehicle
compulsory third party Database in order to identify owners of
insurance, has shown that the uninsured vehicles and fine them.
number of uninsured vehicles
One of the biggest problems in
on the roads is around 70%, establishing a workable compulsory
with this number growing every insurance scheme will be adequate
year. funding. This requires in-depth
research and a thorough evaluation,
The high percentage of motorists especially by actuaries involved in
without any form of motor insurance calculating average costs of claims and
thus a reasonable annual premium
means that the minority who do
to fund these. Cover will have to be CHRISTELLE FOURIE
insure their vehicles are being forced
compulsory, governed and enforced by Managing Director of MUA
to subsidise others through higher
legislation. Insurance Acceptances
premiums.

If the insurance industry has a bigger

pool of premium contributions lower
premiums and excesses will be passed
on to consumers, as the losses of
the few will be compensated by the
contributions of the many.

Compulsory third party insurance was

enforced in South Africa from 1942
up until 1997, which covered bodily
injury and damage to motor vehicles,
when it was replaced with the Road
Accident Fund (RAF). The RAF has
provided financial aid for death and
bodily injuries sustained in motor
vehicle accidents, while the cost of the
damage to the vehicles is usually left
to the consumer and the insurer.

A compulsory insurance body is crucial

in a country like South Africa, where
few motorists currently insure their
vehicles. In the motor industry it will
ensure an element of stability, allowing
more repairs to be carried out, with
the result that more of the vehicles on
the road will be in an acceptable and
roadworthy condition.

Despite the perception that theft

of a vehicle is the main reason for
insurance, the majority of motor
insurance claims, as much as 80% of
all claims paid, arise from accidents.

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 NAAMSA reports
The National Associations of
Automobile Manufacturers of
South Africa has released their

a drop in car sales statistics for new vehicle sales

for January 2014.1

According to NAAMSA new vehicles

sales have dropped from 56 899 units
sold in January 2013 to 53 025 units
this year, a fall of 6,8% or 3 874
vehicles.

January 2014 export sales declined by

19,7%, from 17 393 vehicles exported
last year to 13 960 this year.

NAAMSA attributed the reason for the

drop in sales and export to an increase
in vehicle prices due to inflation,
economic slowdown and rising interest
rates, but they are positive that light
commercial vehicle exports will pick up
from the middle of 2014 onwards.

Growing trend of young

job seekers in car industry
According to a report on
bizcommunity.com2, Hyundai
Automative SA has launched
projects in South African schools
to educate learners about the
motor vehicle industry, especially
in after sale services like
maintenance and repair.

Hyundais apprenticeship programme

at the Imperial Technical Training
Academy has seen a decline in dropout
rates, from 45% in past years to
between 6% and 10% currently.

Henry Gerber, national service

and training manager at Hyundai
Automotive SA, reportedly said that
without the necessary skills, South
Africas car industry will be in big
trouble.

He said about 60% of students

who completed their apprenticeship 1
http://www.naamsa.co.za/flash/press.html
programme has been employed by
Hyundai. 2
http://www.bizcommunity.com/Article/196/454/109101.html

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 Working with
WHEELS

The curious case of

the sinking Corvettes
Wall Street Journal reporter
Jeff Bennett reported on 12
February that disaster struck at
the National Corvette Museum
in Kentucky when a sinkhole
appeared in their skydome
exhibit area and eight classic
Corvettes fell through the floor.
According to a media statement
released on the museums
website the Fire Department
estimated that the hole is 12
metres across and seven to nine
metres deep. The museum was
closed the following two days
for inspection and repair. At the
time of publishing they had an
engineer on site determining the
cause of the collapse.

Picture credits: With permission from

The National Corvette Museum, www.
corvettemuseum.org

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 COVER MARCH 2014 73

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 Financial Planning

How do you explain GEOFF BLOUNT

CEO of Cannon Asset
Managers, looks

the JSE in 2013?

deeper into the JSEs
performance in 2013

How did it happen that in (16% versus 13%), and should therefore market represent investment risk, and
have some valuation premium, we do investors should be cautious here.
spite of an overall drop in
not believe that they warrant a CAPE And while the sexy stocks grabbed all
earnings per share of 6,4% in of 25x versus 15x. the headlines, the index rise masked
2013, prices rose by 17,8%? many amazing opportunities that have
In conclusion, while the JSE in been created elsewhere in the market,
This strange situation masks a aggregate did well last year, this was including smaller cap shares.
great underlying discrepancy in driven by, in particular, a narrow
performance that took place last band of expensive (but typically good This is not the time to sell out of South
quality) large cap industrials that got African equities. Just be very careful
year.
more expensive. These areas of the which of them you own.
Price Earnings (PE) ratios for large cap
shares (the Top 40 that makes up 85%
cap earnings growth versus

of the JSE) rose nearly 24%, despite

Chart one: Large and small

their change in PE for 2013

their earnings falling 8% in 2013,

implying that the market and investors
have made them much more expensive
relative to their declining earnings base.

But amazingly, small cap shares grew

their earnings by 20% yet investors
marked them down, pushing their PEs
2% lower. We have spoken in the past
about small caps being the elephant
in the room that investors seem to be
missing, and here it is again.

We have also spoken about the JSEs

top performing stocks and we have
updated this to the end of 2013, as
shown in Chart 3. A staggering 11% of
last years 18% market rise was from Chart two: The 20 largest individual stock
Naspers, Richemont and SAB Miller. contributions to the JSEs return in 2013
If you owned all other 157 companies
that make up the index, your return
was just 7%.

Another interesting observation that we

can make about the JSE in 2013 is that
60% of the shares underperformed
the All Share Index. Within this group,
the Cyclically Adjusted Price Earnings
(CAPE) ratio fell marginally through
the year from 15,9x to 15,3x (which
represents reasonable value) yet the
CAPE ratio for the 40% of share which
underperformed the JSE, the average
CAPE rose from an already expensive Table 1: JSE metrics of
19x to a very expensive 25x. under- and outperforming
segments
We can also see from the above table
that the average price to book ratio
for the outperforming stocks was
3,3x, significantly above the 2,5x of
underperforming stocks. Although
shares that outperformed the market
last year do enjoy slightly higher ROEs

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 When you dont have
the heart to work NEIL PARKIN
Group Assurance Actuary
at Old Mutual Corporate

According to the World Health due to the death of the member, with highlights the need for greater effort in
only 12% being able to return to work. addressing the underlying reasons for the
Organisation, more people die
prevalence of these diseases.
globally from cardiovascular Graph 3 gives the proportion of claims
diseases than any other cause ending due to death, recovery and The World Health Organisation estimates
retirement. that 23% of the global heart disease
- 17 million people each year burden is a result of people being
- and this is set to soar to 23 These numbers show the dramatic effect overweight. It is estimated that up
million over the next 17 years. of cardiovascular disease on peoples to 80% of lifestyle diseases can be
ability to return to work, especially as prevented by addressing lifestyle factors,
In South Africa, heart disease and strokes they get older. This clearly underscores such as smoking, unhealthy diets and
are the leading causes of death, after the importance of disability and death physical inactivity.
HIV/Aids. The South African Heart and cover. Even more importantly, it
Stroke Foundation asserts that five heart
attacks occur every hour in South Africa,
with one in four of these proving fatal.

But these diseases are not just killers

they disable too. To illustrate this we
analysed our disability income claims
over the last 10 years. The results
showed that cardiovascular conditions are
the 2nd leading cause of disability, being
responsible for 15% of all claims.

Graph 1 gives the proportion of Old

Mutuals group disability income claims
attributable to cardiovascular conditions.

There is a clear increase in the impact

with age. For people over age 50,
cardiovascular diseases are responsible
for 1 out of every 5 claims.

A common myth when it comes to heart

disease is that its exclusively a male
problem. The World Health Organisations
research shows this is not true, with
cardiovascular disease occurring almost
equally in men and women in low- and
middle-income countries.

To test this, we split our analysis by

gender (see graph 2). Although men tend
to have a higher proportion of claims due
to cardiovascular diseases, it is evident
that these conditions are also a significant
contributor to female disability.

Once a disability income claim is accepted

by an insurer, the monthly benefit is
payable until the person recovers, dies or
reaches their retirement age.

On average we paid claimants with

cardiovascular disease for four years. In
45% of cases, the claims were stopped

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 Financial Planning

ways to unlock
your profit
The best way to look at
your business right now is to
keep it simple. What do we
know? Sales volumes remain
flat (unless you happen to own
Shoprite), margins are shrinking,
and bad debt is rising. What
we dont know is where the
rise in profit will come from for
the next two years. Dont bank
on sales volumes increasing, or
improving your margins. Find it
in something different. Find it in
your debtors books.

Most chief risk officers or chief

executive officers invest a fair amount
of time and money into having ANDR PIETERSE
Head of Collections at Fintech, looks
information at their fingertips and
at how effective debt collection can
will have a good idea of what is improve your companys current
wrong in the world. They spend time cash flow and future sales.
analysing what is wrong in their own
businesses and linking that to market
trends, looking for opportunities to
increase sales volumes in tough times. 2. Cant payers are no longer
More analysis, more planning, more customers. They are now debtors.
reading, more information is required. Treat them as such.
This is fantastic, but also leads to
analysis paralysis. We know everything 3. Now is the time to personalise your
we need to know, but we dont do interactions with your wont payers.
anything with the information. Dont use standard debt collection
letters. Dont use scripts. Get to
Tread lightly though. Every debt your customer in person and really
collection activity done incorrectly understand why they dont pay. It is all
could lose you a customer and have about the relationship you can forge
a negative effect on your sales. Done now. Get this right, and you will have a
correctly, you will not only increase loyal customer for life.
your cash flow in the short-term, but it
could also lead to more sales. 4. Debt collection is about your
actions. It is about listening to your
HERE ARE FIVE TOP TIPS FOR customer and resolving problems. Then
GETTING YOUR CUSTOMERS TO it is about getting paid. Listen, act,
PAY WITHOUT TAINTING THE resolve. Always make sure you get
RELATIONSHIP: paid.
1. Establish who wont pay you, and
who cant pay you. Focus your time 5. Your ego should play no role in
and energy on the wont payers, dont debt collection. Forget about teaching
invest your resources on the cant somebody a lesson. It is just not worth
payers. your time and money.

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 Investment

What should you look for when

selecting an asset manager?
Dealing with other peoples Consider the four Ps people,
philosophy, process and performance.
money carries a fiduciary
Too often decisions are made based
duty and responsibility. When solely on performance, but its a
making decisions regarding fund mistake to look so narrowly at a
managers, it is important to fund manager. Performance will tend
to move in cycles, and selecting
assess them with due diligence. a manager based on good past
performance is certainly no guarantee
An asset manager needs to pass the
that the future will be as rosy.
security test in terms of regulatory
compliance, business standing and TAKE A COMPREHENSIVE VIEW
administrative processes. Rather base a decision on all four
factors. Firstly, are the people
KNOW WHO YOU ARE DEALING
involved qualified and do they have
WITH
the necessary experience? How are
From a regulatory point of view, you
they incentivised? This will determine
need to establish whether the business
is registered with the Financial Services whether your assets are managed with
Board (FSB) and has the required your or their best interests in mind.
PATRICK BARKER
licences to practice as an asset
Consider the investment philosophy Private Client Portfolio Manager
manager. Other questions are whether Cannon Asset Managers
or style practised by the manager.
the business is registered with CIPC,
What are the attributes they look for
who the directors and shareholders are,
when making an investment? Can they
and what its BEE rating is. Is the firm
explain what they want to own in their
in good standing with the authorities
portfolios? And when the going gets
(from CIPC to SARS), does it carry
tough, do they stick to their philosophy
appropriate and adequate professional
or do they chop and change?
indemnity insurance and are its
directors or have they been under any ARE THE PEOPLE INVOLVED
Examine the investment process
regulatory or criminal investigation, followed by the asset manager. Is it QUALIFIED AND DO THEY HAVE
now or in the last five years? repeatable? Does it lead to effective
THE NECESSARY EXPERIENCE?
implementation of investment
decisions? Is the process able to be
audited, so if something goes wrong
in their decision making they would be
THERE NEEDS TO BE able to establish what went wrong?

A CONTINUITY PLAN Only lastly should performance be

taken into account. ASISA requires that DOES THE MANAGER WALK THE
IN PLACE IN TERMS OF all advertised unit trust performance TALK?
figures carry the disclaimer: The value Does the individual fund manager
DISASTER MANAGEMENT of units may go down as well as up invest in his or her funds or portfolio?
and past performance is not necessarily You might find that boutique asset
AND DATA RECOVERY. a guide to the future. managers are owner managed and
those managers will possibly have a fair
There is little relationship between shareholding in the asset management
past and future performance. It is far business. This should be very
more important to probe whether the encouraging to a potential investor and
Administrative excellence and record performance looked like it should will carry greater weight knowing that
keeping is another must-have for asset have. Did the manager stay true to aside from their shareholding, they also
managers. Some outsource this and their philosophy? In a time when have their personal wealth invested
some undertake it in-house. There growth stocks are running, one would in the same funds or portfolios their
needs to be a continuity plan in place expect a value manager to show investors are in. For the larger asset
in terms of disaster management and poor comparative performance. Over managers the same can apply although
data recovery. Reporting examples can time, does the manager beat their they are generally not owner managed.
be useful in assessing their standards. benchmarks?

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 Financial Planning

Set your organisational

strategy for the future
performance contract to state the
required performance standards.

With this chart, you will be able to

see whether the positions and systems
within your proposed business structure
relate harmoniously to one another and
if they are grouped in the best possible
way. A well-designed chart should give
a business a sense of equilibrium and
solidity.

There are other benefits to having

a future-focused organisation chart.
Firstly, it will serve as a plan for clear
communication of accountabilities
that is unhindered by individual
personalities. Rather than being a
tool of command and control, the
chart will indicate where authority
and responsibility lie so that power
dynamics never become an issue in
your corporate culture.

A defined structure will also give

your staff a sense of stability and
reassurance, as they know where
they stand, how they should work
together, what needs to be done, what
to expect and whether the position
in your business is the right place for
When you visualise a goal, you planning the future structure of your
business, you will have a blueprint them. Staff may also see opportunities
can work towards it and achieve for their own professional growth and
to fill the appropriate positions
it. So, by envisioning what your with the right staff and put in place development.
company structure will look like fitting internal business systems and
PEOPLE VS POSITIONS
when you have attained your processes.
As you employ people to fill the
strategic objective and reflect Your strategy could be reflected by an positions on your chart, keep in mind
that in your organisational organisation chart, or organogram, with that positions are designed to serve
well-placed boxes and lines indicating your strategic objective and the needs
strategy now, your business will of your business. People should thus
what needs to be done and by whom.
be well on its way to reaching Each box on the chart should indicate be employed to fill positions, rather
that objective. Mimi Pienaar, a position, with a title that defines the than have positions built around
purpose of that position. Each position them. In this way, you minimise your
head of compliance at Masthead, dependency on people and maximise
then needs a statement that outlines
speaks to COVER about the the results of that position, and a business continuity at every desk.
importance of an organisational
strategy within your business.

An organisational strategy is essentially

AS THE PRESENT SHOULD SERVE THE FUTURE,
a planned approach to establishing
operational and employee performance
YOUR CURRENT ORGANISATIONAL STRATEGY
standards and targets. As the present
should serve the future, your current
SHOULD SERVE YOUR BUSINESSS FUTURE NEEDS.
organisational strategy should serve
your businesss future needs. By

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 A DEFINED STRUCTURE Also allocate position titles that are With your new or updated chart at
simple, meaningful and appropriate. hand, you can then determine your
WILL ALSO GIVE YOUR STAFF
DONT GET BURNED BY RISK.
A SENSE OF STABILITY AND
Typical titles in a financial services
provider would include key individual,
future employment needs. Which
vacant positions or ones occupied by
financial advisor, intermediary services unqualified people need to be filled
Manage your risk properly so nothing
REASSURANCE, AS stands
THEY in the wayadministrator,
of business secretary and immediately? Which positions are
your success. By taking advantage of Mastheads range of
compliance officer. you occupying where you would like
KNOW WHERE THEY STAND
to replace yourself? Where do you
services including compliance, risk management and practice
FITTING STAFF INTO YOUR need to replace others? Once these
management, you wont leave yourself exposed. ORGANISATIONAL STRATEGY questions have been answered, list
When drawing up an organisational If you already have staff and wish to the positions in order of priority and
Masthead your advantage.
strategy, or reviewing your current review or create your organisational allocate a deadline or time frame to fill
version, be sure that all the outcomes strategy, consider each employee them.
youMasthead
To nd out how need to realise youryou,
can help business
visit masthead.co.za
in light of your new organisation
objective are allocated to positions. By knowing where your business is and
Provider of compliance
Group workand risk management
according serviceschart
to skill category to alland their individual strengths, having a plan to get there, you have
weaknesses and career aspirations.
and level,
nancial services and avoid superfluous and
providers. every chance to fulfil your objective.
Think about whether each person is
redundant managerial positions.
currently being utilised appropriately
With each position created, consider and if they have the right qualifications
why the position exists, what you for the position. Is he or she filling too
want to happen there, whether your many positions at once, fulfilling a role
COMPLIANCE
that is too diverse in terms of skill level
business would benefit by having the
position, and the role it would play or skill category, doing work that is not
RISK MANAGEMENT
in moving your business toward its reflected on your chart or occupying
strategic objective. You may want to PRACTICE
a part-time position on MANAGEMENT
a full-time
take the six fairness outcomes of the basis? With these details in mind, write
BUSINESS INTELLIGENCE
Treat Customers Fairly programme into down your comments regarding what
account when determining the results position they should hold in your new
required from each position. organisational strategy.

SEE OUR
NEW
WEBSITE
WWW.COVER.CO.ZA

Subscribe online,
email Brent:
brent@cover.co.za
or call: 083 567 757

COVER MARCH 2014 79

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 healthcare

Tips for my client:

Stretching their medical cover
the risk portion of your medical scheme
contribution, meaning you dont have
to use your savings account to better
These days its a challenge manage your health.
to make your medical
cover last the whole year. 4. AVOID GOING TO SPECIALISTS
DIRECTLY
With lifestyle changes, Its easy to think that only a specialist
clients are often depleting can treat you, but many more common
their medical aid savings conditions can be identied and
treated by your GP. Avoid going directly
before entering the to a more expensive specialist, unless
second half of the year. recommended by your GP.
Liberty Medical Schemes
5. KEEP THE COSTS OF DIAGNOSTIC
Executive Principal Ocer, TESTS LOW
Andrew Edwards, oers Few people realise how much they spend
tips to make sure your on unnecessary blood tests each year.
Your GP should keep a comprehensive
client is not out-of-pocket le of all your visits and test results and
before the end of the year. build up a holistic picture of your health
over time. Avoid chopping and changing
doctors if at all possible, as dierent
doctors may order the same blood tests
so shop around. You will nd doctors for the same symptoms.
1. USE GENERIC MEDICINES WHEREVER
POSSIBLE who are part of a medical scheme 6. UNDERSTAND HOW YOUR SCHEME
You can cut the amount you spend on network who will oer more aordable WORKS
medicines, especially chronic medication rates. Often medical scheme members feel
by as much as 30% by choosing generics baed by the amount of information
rather than the more expensive original they are given about payment limits,
if your doctor approves it. Some medical savings accounts and in- and out-of
schemes make it compulsory to use a -hospital allowances. Read all the
generic if it is available on the market, information you can and dont be afraid
but check with a doctor rst. to ask questions. Your nancial advisor
or call centre sta should be able to
explain to you how much you are able
to spend on dierent providers, such
as GPs and specialists and medical
procedures before having to pay out of
your own pocket.
3. PREVENTION IS CHEAPER THAN CURE
Taking preventative measures to manage 7. PLAY BY THE RULES
your health not only saves you money An unauthorised operation or medical
in the long run, but helps saves lives procedure can be expensive, so
too. Each year, you should plan to go always remember to phone ahead for
for tests appropriate for your age such pre-authorisation from your scheme.
as cholesterol, insulin, blood pressure, Make sure your medical scheme
2. MAKE SURE YOUR HEALTHCARE mammograms or prostate checks as well covers emergency events, such as
PROVIDER CHARGES MEDICAL SCHEME as dental and eye check-ups. These types car accidents, automatically. When
RATES of tests can pick up serious diseases such applying for medical cover, be honest
Some doctors and specialists charge as diabetes, cancer and heart disease about your state of health and any
more than the medical scheme rate. early on, allowing you to manage them pre-existing conditions, or the scheme
There are plenty of doctors who have rather than landing up in hospital. Some can refuse to pay for certain treatments
agreed to charge medical scheme rates, schemes cover these types of tests out of based on your non-disclosure.

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 8. KEEP A RECORD 9. BUDGET 10. EMPOWER YOURSELF
Its easy to lose track of which claims While health problems are dicult to People dont often question their
you have submitted and which have predict, its wise to try and spread out healthcare provider and ask if a
been refunded to you and at what your medical expenditure throughout treatment or medication is really
rate. Keep a le detailing all claims the year. In winter, for example, its necessary or negotiate a price, because
and monthly statements. This will help more likely that you or your family they do not have the knowledge to help
you manage your medical cover better will require more GP visits to treat them make a proper decision. Educate
and it will help you analyse whether upper respiratory infections. Plan to yourself about your health, your
you need to upgrade your cover to a put extra money away each month cover and ask your nancial advisor
higher option, even if it seems more at the beginning of the year to fund or medical scheme for information
expensive. A young family, for example, any shortfalls later on. If you require and advice. By actively managing your
may nd that its more cost eective to surgery, like any other service, health and medical cover, you can make
take out day-to-day cover that covers dont be afraid to ask for a quote each rand go further.
GP visits rather than funding those beforehand.
visits themselves.

A healthy choice of
Employee Wellness
Without a doubt, taking group buying power has allowed Aon to
provide CGF constituents competitive
care of your employees is as
premiums. This ultimately provides
important as taking care of an organisation with a cost effective
business. Geraldine Aves of insurance solution for their employees.
Aon South Africa speaks of the The reality is that South Africans are
advantages of a comprehensive under tremendous financial pressure,
group insurance scheme for exacerbated by continual fuel price
your employees, and how it is hikes, water and electricity price
increases, high education costs, the
increasingly becoming part of the rapidly increasing price of food and
overall corporate benefits and basic necessities and so on. By adding
wellness equations, with more a group insurance scheme to the host
of other employee benefits such as
employers taking an active role
retirement and healthcare, employers
in supporting their employees get to help remove or at least mitigate
financial fitness too. employees anxieties about protecting
their personal motor and, household
When correctly structured and assets, usually with much lower
managed, employee group insurance premiums and better benefits than they
scheme can become an important tool could obtain on their own. form part of a much bigger picture of
in the armoury of employers wanting to employee benefits. But they do address
stay ahead in the vital arena of modern Any efforts to reduce your employees some of the major financial anxieties
day HR management by strengthening financial strain is a welcome and among staff, by assuring them that
its case as an employer of choice much needed relief in the current their private assets are protected and
among job seekers. environment, and adds a further will be replaced in the event of a loss.
attractive skills retention benefit to the
By using our large client base and usual retirement, healthcare, life and Being under-insured in the event of a
market influence, we are able to secure disability offerings. total loss can have devastating financial
superior cover, preferential rates and consequences for them. This in turn
preferential service for companies and Obviously group insurance schemes are will impact on their work performance
their employees. To this extent, and not the be-all-and-end-all solution for and productivity if their personal
through our association with CGF, the employees financial concerns, and they finances are in upheaval.

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 Governance

SAs directors need

to get with it
Gerald Seegers, PwC Human a broad range of industries including
energy, banking, mining, telecoms,
Resources Leader SA, discusses
healthcare, manufacturing and retail.
how South Africas directors
have yet to see the value that Regarding remuneration, companies
agreed that directors should be paid
integrated thinking and reporting more with one proviso that their
brings to the long-term viability output increases. This suggests
of their organisations. Although that company secretaries and other
stakeholders still need to see a tangible
South African companies have
difference in what directors are
embarked upon the journey delivering in their adjusted roles, before
of better business reporting, being willing to pay more. However, at
they still need to reach their this stage outputs have not changed
significantly enough to warrant full
destination and discover support of increased remuneration.
how well they are placed to
PROFILE OF DIRECTOR
respond to stringent corporate To get an objective view on how The survey shows that most people
and regulatory changes and directors are responding to integrated tend to seek and accept board
challenges. thinking and reporting, PwC South memberships to raise their personal
Africa recently conducted a survey profiles and for purposes of intellectual
among company secretaries. They stimulation. It is interesting to note
were asked how they perceive board this, given that being a director can
readiness in this regard. Company result in fines and personal liability for
secretaries are well placed to offer company debts, acts and omissions.
these views given their continuous
access to their boards and arms length Directors should be managing a broad
relationship with them. Responses range of risks and opportunities,
were received from companies across as well as protecting themselves

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 and the company as rigorously as
possible. However, there tends to be a
reluctance to accept change in some
instances and even an inability to
reprogramme their thinking for current
business circumstances and pressures.

Among the many board self-evaluations

which PwC have facilitated, results
have shown that boards identify
integrated reporting and stakeholder
engagement as the main two areas
that require more attention and
improvement from business.

ONE OF THE MOST

SOUGHT AFTER ATTRIBUTES
FOR A NEW DIRECTOR IS
INDUSTRY EXPERTISE.

One of the most sought after attributes

for a new director is industry expertise.
According to the report, it is not
surprising that generic business acumen
is failing in importance, as being able
to understand and test the business
model lends itself to better value The wide range of risk issues being INTEGRATED THINKING AND
creation. Gender and racial diversity are dealt with by boards is symptomatic of REPORTING
also good examples of the necessity to the reactive manner and short-term Just over half of companies (57%) said
take into account external pressures, approach many take in addressing risk their executive committees were well
which will ultimately have an effect on issues. The board should become more prepared to respond to the issues of
the long-term viability of South African proactive by implementing a formal integrated thinking, reporting and the
businesses. stakeholder engagement framework integrated report.
with the ability to focus on most
Risk management skills ranked low. material risks. While the survey shows that some
This is surprising given that risks are boards do get involved in the planning
defined as those issues that may Risks are still being dealt with in the and development of the integrated
prevent an organisation from achieving various board committees. As the report, rather than just signing off the
its strategic objectives and one of highest decision-making body in the contents at the end of the process,
the main functions of the board is organisation, the board is expected to boards should get involved in the
to ensure that goals and targets are make the final judgment on what is integrated reporting and thinking
achieved. most material overall. process throughout the year.
HR (employees), marketing (customers) STAKEHOLDER ENGAGEMENT Executives and board members alike
and compliance were rated of minor The survey shows that the majority should be involved in deciding the
importance. This suggests that of respondents believe they have a themes for the report and the minutes
stakeholders and stakeholder risk are useful stakeholder engagement policy of the board meeting should provide a
being grossly underestimated. in place. The survey also shows that framework for the report content if the
stakeholder engagement is mainly system is working as it should.
RISK AND OPPORTUNITIES dealt with at management level.
MANAGEMENT, STRATEGY AND Boards in particular appear to be at While the additional responsibilities
MATERIALITY arms-length from processes involving for integrated thinking, stakeholder
According to the study the board stakeholders. engagement and integrated reporting
only spends 25% to 50% of its time place greater liability on the shoulders
on risk management. Of this time, Today the term stakeholder of directors, most respondents do not
a large proportion was spent on engagement is emerging as a means believe that liability cover for directors
financial, reputational and information of describing a broader and more should increase. If these roles are
technology risks, although a wide inclusive process of communication properly undertaken, risks will go
variety of other risks were also between a company and those down, both for individual directors and
mentioned. potentially affected by it. the organisation as a whole.

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 Pension Funds Adjudicator

Pension Fund Adjudicator

on pension pay-outs
In the following three because of their ages. It submitted
that according to the actuarial tables
case studies, Muvhango
the amount required to provide for the
Lukhaimane, the Pension six minors was R559 336,35, which
Funds Adjudicator (PFA), made represented a shortfall of R155 674,37
interesting rulings with regards to compared to the death benefit of R403
661,98, which was almost 40%.
pension pay-outs.
They considered the position of the
BENEFICIARY NOMINATION FORM complainant compared to the position
IS ONLY A GUIDE of the six minors. Section 37C of the
A deceased municipality employee was Pension Funds Act states its primary
a member of the Municipal Gratuity purpose is to protect those who were
Fund (first respondent). Before he died financially dependent on the deceased
he allocated 30% of his death benefit during his lifetime.
(R407 739,37) to his mother, 20%
to his sister and 10% to each of his If the complainant received the amount
Sanlam said the complainant had
two children. He changed his benefit stipulated in the beneficiary nomination
declared she was dependent on her
statement on 31 December 2011 to form, the children would have been
son for R1 000 per month and that she
40% to his mother, 30% to his sister worse off. The beneficiary nomination
indicated that she was employed and
and 15% to each of his two children. form is thus only a guide.
earned a monthly salary of R3 369,60.
The first respondent reduced the benefit She subsequently advised she had FUNDS ADMINISTRATORS MUST
share of the mother (the complainant). been retrenched. REFUND TERMINATION CHARGES
She complained to the Office of the A member of a retirement fund and
The first respondent considered the
PFA that she only received R2 056,92 her financial advisor asked the first and
age of the dependants, the relationship
in September 2012, and that she was second respondents if there would be
with the deceased, the extent of
informed that she would receive a penalties if the complainant were to
dependency, the deceaseds wishes in
further payment of the same amount. make her retirement annuity paid-up
the nomination form, and the financial
affairs of the dependants including or if she were to transfer it to another
Sanlam Life Insurance Ltd, the second fund. The respondents informed her
respondent, said six minor dependants their future earning capacity potential.
The deceaseds children and minor there would be no penalties charged.
were identified: a two-year-old, an
eight-year-old, three nine-year-olds sister were dependent on him and had She then made her retirement annuity
and the deceaseds 16-year-old sister. no earning capacity in the near future
policy paid-up and asked the second
respondent to cease deducting
premiums from her account.

The respondents didnt cancel this policy

and continued to receive premiums
from her bank via a stop order, which
she discovered in January 2013. She
asked the respondents to terminate the
policy and they charged termination
penalties on her fund value.

The second respondent said when the

complainant instructed them to make
her policy paid-up, her investment
value was R80 112,32. It submitted that
a causal event charge of R16 758,92
(20,92%) was to be imposed and her
net fund value thereafter would be
R63 353,40. It said that in response to
enquiries made by the complainant, it
had confirmed that there is no penalty
for making the policy paid-up.

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 IF THE COMPLAINANT RECEIVED THE
AMOUNT STIPULATED IN THE BENEFICIARY
NOMINATION FORM, THE CHILDREN WOULD
HAVE BEEN WORSE OFF. THE BENEFICIARY
NOMINATION FORM IS THUS ONLY A GUIDE.

document. She duly completed the

application for the benefit to be paid
to her.

The respondent said the complainant,

a Mr CJ Radebe, subsequently
presented two original copies of
his identity documents. He did not
provide documentary proof of his
family relations with the deceased.
The respondent argued when the
complainant was asked questions for
purposes of verifying his identity his
answers were inadequate.
It admitted that due to an She ordered the second respondent
administrative error on its part, the to pay all termination charges and/ The respondent said it was not satisfied
policy was made paid-up only on the that the complainant was the deceaseds
or causal event charges levied on the
second instruction. son, and that it was satisfied the
complainants fund value by the first
daughter was the correct beneficiary.
respondent when she ceased paying
The second respondent offered her premiums. The complainant submitted a copy
R2 000, for the poor service
of his ID document with the same
rendered. The complainant rejected THE CASE OF THE THREE RADEBES
numbers as the female Radebe. He had
the offer because the penalties On 30 January 2014 the PFA has
a letter from the Department of Home
suffered were around R20 000. ruled that the death benefit totalling
Affairs confirming the change of ID
R129 512,46 be paid to the son of the
The second respondent submitted that numbers. He submitted a copy his new
late member of the Metal Industries
prior to the query by the advisor and ID document and birth certificate with
Provident Fund (respondent).
its response on 1 April 2011, it provided male ID numbers and a copy of the
the advisor with a net paid-up value The respondent had declined to make death certificate.
for the respondent which then was payments to the complainant and had
The Office of the PFA said a simple
R60 00. It argued that this was the instead paid to a woman by the same
enquiry to the Department of Home
complainants net fund value after the name with a different ID number.
Affairs confirmed that a male person
un-recouped expenses were deducted. with the same name was issued an
When the deceased died in 1999, she
When it had said there would be no identity document with an ID number
had not nominated any beneficiaries. In
penalty charges, it was in reference to that was reserved for female persons.
2002, the respondent was notified of
the surrender penalties and not to the It submitted that this identity document
a child of the deceased by the childs
deduction of un-recouped expenses. had since been cancelled and the ID
aunt and guardian.
It submits that this was in line with its number was invalid.
policy document. The aunt provided a copy of the death
certificate of the deceased and a copy On 5 May 2009, the same person was
The PFA said the second respondent was of the birth certificate of the child (CJ re-issued with a new ID document with
being disingenuous in its explanation of Radebe). The respondent paid the the same ID numbers. Department
what was an unequivocal statement to childs benefit to the aunt in monthly of Home Affairs also confirmed the
the complainant that no penalties were instalments, which was to be made until residential address of the complainant,
payable. it either got exhausted or if the child which was the same as the address of
completed schooling or reached majority. the deceased. The female Radebe who
The fact that the second respondent received the benefit lived in Yeoville.
wrongly informed the complainant that The respondent claimed it was
there were no penalties charged for subsequently contacted by a woman On the evidence submitted, the OPFA
cessation of contributions, whereas in with the same name as the child who was convinced that the complainant
fact there were, is accepted by this identified herself as the daughter of the was the real beneficiary. The PFA
Tribunal. deceased. said a criminal act was perpetrated
by the person who claimed to be the
The PFA was satisfied that The woman was interviewed by deceaseds daughter and she ordered
charges sought to be levied by the two officials of the respondent and the respondent to pay the complainants
respondents were within the law. she presented an original identity death benefit of R129 512,46.

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 Actuarial Society of South Africa

Why top students choose

actuarial science
Many of South Africas top The option of adding the CERA
credential to an actuarial qualification
achievers from 2013 have
is rare and highly sought after
enrolled for a degree in Actuarial internationally. In South Africa, there
Science at universities around are currently 23 actuaries with this
the country. qualification.

WIDER FIELDS
Actuaries use their analytical, statistical Regulatory reform initiatives sparked
and mathematical skills to calculate the by the global credit crunch widened
probability, risk and financial impact the fields that require actuarial skills.
of future events. Actuaries in the In banking the value of using actuaries
US have the best job, according to a for their unique modeling, projection
ranking of 200 professions in the US and risk management skills was only
by Les Krantz, author of Jobs Rated realised recently.
Almanac. His ranking was based on
five criteria: environment, income, These actuarial skills are valuable for
employment outlook, physical demands banks as they develop and implement
and stress. economic capital management and risk
adjusted performance measurement
Around the world, actuaries find frameworks.
themselves in the enviable position MIKE MCDOUGALL
of being in high demand. The global The Actuarial Society will be CEO
financial crisis, which exposed introducing a Banking Fellowship Actuarial Society of South Africa
excessive risk taking by organisations, subject for South African actuaries in
opened a new career path for actuaries 2015. The modeling and development
since they are skilled at identifying and of reform initiatives like retirement,
mitigating risks. The increased focus on social security and healthcare is heavily While becoming an actuary seems
the importance of risk management, dependent on actuarial input. like a good idea in a job market
combined with the new trend of data where finding employment is difficult,
analytics, is creating endless new The global big data revolution presents achieving the qualification is not easy.
opportunities for actuaries. South African actuaries with an It takes a minimum of seven years
unprecedented career opportunity. for an extremely talented and hard
A CAREER IN MANAGING RISK McKinsey research shows that only working individual to qualify as an
South Africa is one of 13 countries actuaries, operations research analysts actuary.
in the world able to boast actuaries and statisticians have 100% of the
formally trained in effective risk deep analytical skills and talent needed With a degree the prospective
management across organisations. for big data processing. actuary will have to find an actuarial
Three years ago South Africas trainee role with an employer. For
Chartered Enterprise Risk Actuary GROWING A SUPPLY OF ACTUARIES the next three to six years they will
(CERA) qualification was approved The United States Department of need to pass the Actuarial Societys
by the CERA Global Association in Labour recently predicted that the examinations and attain a satisfactory
Switzerland, granting the Actuarial employment of actuaries is expected level of work-based skill. Only once
Society the right to award the global to grow faster than the average for all they have been accepted as a Fellow
CERA credential to individual actuaries occupations through 2014. In addition, or Associate member of the Actuarial
who have satisfied stringent education global job-search portal careercast.com Society, can they call themselves
and training requirements. has rated it the best in the US in 2013. actuaries.
Once awarded, the CERA qualification The Actuarial Society of South Africa
is internationally recognised, which is has 956 qualified members (Fellows
critical in ensuring best practice risk
ACTUARIES IN THE US HAVE and Associates) of whom 803 (84%)
management across global sectors and are white. Over the past 15 years, the
companies, and therefore particularly THE BEST JOB, ACCORDING number of African, Coloured and Indian
relevant to actuaries employed by Fellows has increased from 2,2% to
companies with an international TO A RANKING OF 200 16% and the number of female Fellows
presence. from 6% to 20%.
PROFESSIONS IN THE US

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 Financial Intermediaries Association of Southern Africa (FIA)

Global best practice

Keeping a close watch on international intermediary trends

The Financial Intermediaries Committee meetings, which serve as consumer protections will feature on
guidelines for intermediary associations the WFII agenda.
Association of Southern Africa
around the world.
(FIA) is preparing to participate A number of European countries
in the World Federation of As an advocacy group representing have already adopted a no
the interests of global insurance commission approach with respect
Insurance Intermediaries intermediaries, the WFII provides to intermediation in the life risk and
(WFII) 15th World Council and inputs to the powerful International investment disciplines, says Casserly.
Executive CSE Committee Association of Insurance Supervisors Stakeholders in the South African
(IAIS). The IAIS represents more than financial services industry are still
meetings in Sydney, Australia 170 insurance supervisors and is formulating a policy in this regard.
from 15 to 17 March 2014. instrumental in debating and steering
global insurance regulation.

The WFII creates an additional channel THE FIA WAS AMONG THE FOUNDING
for the FIA to engage with its own MEMBERS WHO LAUNCHED THE WFII
market regulators, says Casserly.
IN JANUARY 1999.
Jonathan Dixon, Deputy Executive
Officer of Insurance at the (Financial
Services Board) FSB, along with other
FSB staff, is active in a number of the The FSB is leading a comprehensive
IAIS committees that are responsible review of broker remuneration through
for setting the rules that global its Retail Distribution Review (RDR)
insurance regulators abide by. discussion paper, which will redefine
advice, intermediary services and
Aside from structural regulatory
product sales and appropriate ways to
impediments to cross border insurance
remunerate financial intermediaries.
trade it is likely that the US introduced
Foreign Account Tax Compliance Act The experiences of other country
(FATCA) will be under discussion at this markets have informed our position
years WFII gathering. on the remuneration issue and we will
not support regulatory reform just for
Member associations of the WFII
the sake of it, says Van Pletzen. The
have engaged with the appropriate
FIA will ensure that intermediaries are
structures in their respective country
adequately remunerated for what they
markets to provide feedback on these
Justus van Pletzen, CEO of the FIA, do, whether it is for giving advice or
issues. The FIA has discussed concerns
and Seamus Casserly, past president related intermediary services.
with the FSB in the hope that the
and director of the FIA and current regulator can use its position in the
chairman of the WFII, will represent the Without the involvement of an
IAIS and its access to SARS and the DTI intermediary no financial product will
Africa Regional Structure this year. to ensure positive outcomes. fulfil the purpose for which it is sold,
The FIA was among the founding concludes Van Pletzen. The value
The FIAs participation in WFII
members who launched the WFII of independent financial advice to
structures ensures that we are kept
in January 1999. Today the WFII customers is a critical component for
up to date on the open exchange of
represents over 400 000 insurance information and the frank assessment adequate consumer protection.
intermediaries from more than 100 of issues that are potential future
national associations in more than 80
The WFII is tasked with the
drivers of change in the industry, liberalisation of insurance intermediary
countries. adds Van Pletzen. It is important for markets to the benefit of consumers,
South African intermediaries to be by focussing on the IAIS Core Insurance
The purpose of the WFII is to detect represented on the global platform
international trends in intermediary- Principles, in particular market conduct
in order to anticipate regulatory
related issues and to give policy rules for intermediaries. South Africa
interventions and to inform their on-
direction to its members on current is on track with consumer protection
going discussions with local regulators.
and future issues on the international responsibilities through the FSBs
agenda, says Casserly. The principles Remuneration structures in the life risk Treating Customers Fairly (TCF) regime
and positions of the WFII are defined and investment space and the global and other pro-consumer legislations.
each year at the organisations trend towards comprehensive financial

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 Events

Sanlam wins Another

Raging Bull award Raging
The Sanlam Investment unit trust management companies.
They cover domestic (South African
Bull for
REZCO
Management (SIM) Industrial
domiciled) and offshore funds (funds
Fund was named the best South which are not domiciled in South
African equity industrial fund Africa but are approved by the
at the prestigious Raging Bull Financial Services Board (FSB) and can
therefore be marketed to South African The REZCO Prudential
Awards held in Cape Town on 29
investors). Fund has won its first
January.
The SIM Industrial Fund is a pure prestigious Raging Bull
The fund has been the best performing equity, sector specific fund which aims award on 29 January. This
industrial fund over one, three and 10 to outperform the FTSE/JSE Industrial is the fourth Raging Bull
years, and the best performing equity Index by investing in selected shares
in the industrial sector. The fund is
award for REZCO Asset
fund in South Africa for the past 10 years.
suitable for clients requiring larger Management, with its
The Raging Bull Awards, now in their exposure to industrial shares, with the Value Trend Fund having
18th year, acknowledge the stars of associated capital growth this sector
won previously in 2008,
the collective investment industry in is able to offer. The fund may invest
terms of top outright performers, best a maximum of 20% of its assets 2009 and 2012.
risk-adjusted performers and the best offshore.
The REZCO Prudential Fund, in
compliance with Regulation 28
of the Pension Funds Act 24,
won in the category Best South
African multi-asset high equity
fund, over the three-year
period ending 31 December
2013.

The fund, which has a

moderate risk profile, invests
in a combination of shares,
bonds and cash. The award
for best performance over the
three years was achieved with
good downside protection.
Our company philosophy is:
Preserving capital and creating
The Raging Bull awards were held in wealth.
Cape Town on 29 January 2014.

From left to right: Laura du Preez, editor Personal Finance,

ROB SPANJAARD
Matthew de Wet, Nedgroup, Marlo Schultz, Sanlam Investment Investment Director of REZCO
Management, and Ernie Alexander, Profile Media. Asset Management

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 INSETA spends R4,2m on
314 learners at FET colleges
colleges and other Sector Education
and Training Authorities (SETAs) in
the area. This committee oversees the
establishment and functioning of SETA
offices at FET colleges and manages
the INSETA deliverables.

Government identified FET colleges as

places of learning which could address
the acute middle-level skills crisis.

Challenges associated with FET

colleges include the poor image of FET
colleges, lack of institutional capacity,
and quality challenges which are not
easy to address.

FET colleges are spread across all nine

provinces and have a wider geographic
reach than universities. FET college
education includes a significant
increase in access for learners (that can
be achieved with less investment than
a corresponding increase in university
enrolment), lower costs as compared
to universities, and the social benefit
of including young people currently not
in education, employment or training
to participate by studying in work-
Janine Adams, Skills Development Facilitator at Liberty, received oriented programmes. This illustrates
the Recognition Award for Libertys contribution towards skills that FET colleges are an important
development from INSETAs CEO, Sandra Dunn (right). strategy to improve our young peoples
skills.

The Insurance Sector Education

and Training Authority (INSETA)
has committed R4,2 million to
learnerships and bursaries for
314 learners (67% of whom are
unemployed youth) at Further
Education and Training (FET)
colleges.

The Western Cape and Gauteng have

an equal number of learners supported
by INSETA (total of 70%), while
Mpumalanga has 24% of learners and
the Eastern Cape has 6% of learners
supported by INSETA.

At Ingwe FET College in the Eastern

Sonwabo Notshulwana (left) is INSETAs Liaison Officer
Cape, INSETA is part of a steering
at Ingwe FET College in Mt Frere, Eastern Cape
committee, made up from FET

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 Events

Cocktails in Forest Town

New National Assurances annual Client Cocktail at its Forest Town offices coincided with Financial
Director Gony Pillays birthday on 25 October 2013, so it was a joint celebration for the companys brokers
and administrators. Strategic Director Kalim Rajab paid tribute to the companys partners during a difficult
year, and thanked them for their innovativeness and dedication.

From left to right: Gony Pillay, Paul Myers, Shaheen Rajab,

Christo Stonehouse, Andr Swart, Mahmoud Rajab, Judy
Da Sa Pohl, Gary Kuhn, and Thiroshen Naidoo

CIAs new product

calls a chisel a chisel
A rose by any other name would specifically excluded, and all exclusions
are written in red.
smell as sweet.
CIAs new policy wordings provide
Not when it comes to insurance,
Broadform Assets All Risks cover for
Shakespeare.
buildings of different descriptions,
CIA, an underwriting management occupations and legal entities. The
company specialising in building three new policies are: Community
insurance, launched their brand new Living Insurance Policy, Broadform
product in Johannesburg and Pretoria Building Insurance Policy, and
on 4 and 5 February 2014. Broadform Houseowners Insurance advice is important, said De Waal.
Policy. Along with the new policy wording
The CEO of CIA, Andr de Waal, comes a Key Information Document
introduced the companys new In addition to the plain language (KID), a summary of benefits for
language policy wordings to brokers principle, all the policies have been brokers which will help them be FAIS-
and the media. written in a larger, more legible font compliant.
that is best suited for both print and
CIA has applied a plain-language electronic documents. Existing CIA policies will be converted
policy to all the buildings they insure. to the new format from March 2014.
De Waal said: There is no fine print De Waal said that Treating Customers CIA will be hosting broker training
in our wording, what you see is what Fairly (TCF) is one of the CIAs core workshops around the country this
you get. Everything is covered unless values. When it comes to FAIS your year.

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 Breaking new ground
with Camargue
Three years ago Camargue
launched Broadform Liability
cover into the SME market.
This year Camargue announced
ground-breaking changes to
the 2014 Broadform policy, and
its radical new multiple choice
telephonic proposal form, at the
Camargue Liability Seminar on
20 February. Commercial Crime
Liability remains a huge growth
opportunity for brokers.

Consulting Insurance Professional and

Business Developer Mari Williams
highlighted the objectives of the event:

We illustrated insurable risks as

the known element the tip of an
iceberg and defined our products
in this space. We wanted to highlight
the value our risk managers add to
the not so obvious risks, like labour,
compliance, customer and supplier
contracts, tax, finance and compliance
audits and crime.

Camargue abides by the M-cubed

principle Manage, Migrate and
Mitigate risk.

John Stebbing introduced the CGL/

Broadform Liability product and the
new extensions of this product. LegalX
MD Werner Barnard presented a profile
of their company and their value
proposition for Camargue policyholders.
Angela Oosthuizen (COO) of the
Institute of Directors SA said they are
aware of their fiduciary liabilities and
roles and responsibilities in terms of product. Michael Barker, Forensic Fraud represented the Corporate Governance
King III. Our Forensic Computer Lab Specialists, showed the audience a Accreditation (Pty) Ltd (GCA), and
specialists Cyanre, represented by profile of a likely thief and the most Bruce Kokkin and Jonathan Lewis
Marius Myburg, explained the world of commonly used methods. represented the FQ Financial Skills,
cyber crime and their ability to guide who covered important aspects of
the insured through this minefield of Our other risk managers present compliance, governance, death benefits
liabilities and exposures. included Advocate Louis Nel from and retirement fund reform changes.
Corporate Options, a legal expert They advised on legal changes for both
We illustrated how the regulatory in the contractual obligations and employers and trustees.
changes and exposures helped shape vetting of agreements between service
the Camargue Commercial Crime suppliers and customers. Steve Dold

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 Youve seen the signs, the purple
billboards, the funky new font.
Hollard is back with a brand
new lick of paint. Hollard last
injected fun into the financial
services sector with its we get
you campaign in 2010. After a
prolonged absence as far as the
brand is concerned, Hollard once
again challenged perceptions
as it re-presented itself with a
revitalised corporate identity (CI)
and brand advertising campaign.
COVER caught up with the brains
behind the campaign, Heidi
Brauer, marketing director for
Hollard, who is brave in her work
and her everyday life. COVER also
went to see what all the fuss was
about during the internal Dont
Worry. Be Hollard. campaign, a
week of activities called Nothing
Rhymes With Purple, and never
wanted to leave.

WHAT DO YOU THINK OF INSURANCE quite fraught, trying to distil an understanding of

ADVERTISING IN GENERAL AND WHERE CAN the content we as Hollard uniquely provide, and the
WE IMPROVE, TO MAKE IT EXCITING? DID context in which we provide it.
IT HELP THAT YOU WERE NOT FROM THIS Our Afro-global approach means we need to have many
INDUSTRY? hats. I joke that we serve
In any industry theres good advertising, not such good people from LSM1 to
advertising and really great advertising its getting LSM41 it keeps us on
tougher and tougher to do great stuff because the our toes as we consider
consumer is more demanding than ever with greater the extremely diverse
access to multiple media sources and more opinions markets and what they
than ever! At Hollard, we have such a multi-faceted value face.
chain, with so many types of consumers that its a real
challenge to be consistent and inventive and appealing Ultimately, living for today
at the same time. I think some navet (hopefully only isnt the way to go,
intelligent!) to the category is a help, but Im by nature a we need to be boldly
challenger and I will always ask if theres a better way. and bravely ready for
tomorrow, without worry.
HOW DID YOU GET TO THE THEME FOR THIS And you can only do that
CAMPAIGN? WHY LIVE BRAVELY? if youre prepared. Thats
Loads of smart people from inside our business and how Hollard and our
outside our business spent many hours together, some partners can help.

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 DONT YOU THINK LIVING IN SOUTH AFRICA IS
BRAVE ALREADY?
South Africans are passionate and determined for
certain, but bravery comes from being considered and
prepared and informed and we could use a little more
of that!

DO YOU LIVE BRAVELY?

When I was at kulula.com we took on FIFA in an ad
campaign during the 2010 Soccer World Cup, Ive
walked on fire, switched industries and joined an
insurance group, and have grown two little boys into
young men I think that shows bravery!

WHICH PART OF THE WHOLE JOURNEY TO

A NEW CORPORATE IDENTITY AND THIS
CAMPAIGN WAS THE MOST FUN?
I have loved it from the moment I began working with
Hollard and we identified the need for it. Every step
of bringing my team together to do this, making every
one of them and our agencies a brand parent, the HOW WILL YOU PULL THIS THEME THROUGH
exhilaration of knowing when you have pinned down TO YOUR PARTNERS, SEEING AS THEIR BRANDS
the strategic approach, and then the leadership team ARE DIFFERENT FROM YOURS?
buys it! And then when youre ready with some ideas, The brand identity was specifically designed with
sharing with just enough people to get input while still our many partners in mind. Listening to them over
keeping a secret! And then the creative gestation and years, and research in the early stages of our strategic
birthing agony and ecstasy! process, revealed that they needed a Hollard logo that
was easier to apply and would be simple and pleasant
HOW DID YOU ENSURE EVERYONE FEELS THEY to use alongside their own. A whole greater than a sum
HAVE CONTRIBUTED TO THIS NEW IDENTITY of the parts, which is what partnership must be.
AND JOURNEY, ESPECIALLY THE ETANANS,
Our new identity was designed for ease of application,
WHO LOVED THEIR RED? low complexity, few rules and simple, quirky elegance!
This needed to garner opinions as widely as possible
without going too wide as it can get unwieldy and HOW WILL YOU ENSURE THE HOLLARD STAFF
confusing. We had many and varied stakeholders MEMBERS ALSO LIVE THIS THEME?
to consult and we ensured we included a variety of We began at home first. We spent a week prior to
partners, staff, consultants and others at research our external launch with our people from far and
stage for starters and then when appropriate along the wide gathering together for a wonderful week called
journey. We had actually been planning this change for Nothing Rhymes With Purple which gave them a
some time before Etana and also Exiliti came back into chance to reignite passion for themselves and for
the family, and so the timing was perfect. purple. This campaign is a manifestation of all that is
Hollard. It comes from our purpose and our values and
it isnt just a decoration.

The idea behind the playful executions comes from the

insight that at times we all worry. Excessive worry can
sometimes paralyse people and prevent them from
living bravely. Together with our partners, we are able
to offer many solutions to financial worries, thereby
giving customers the opportunity to go out and live
with purpose.

It is re-igniting our vooma to serve and innovate

better than ever!

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 Market Cover

IKHAYA LE THEMBA being readily accessible to clients and that would like to accept projects for
The 28th of March 2014 will see our investors, while also enabling us to which they have the requisite skills, but
first fundraising auction held at Nova adequately monitor local developments not the necessary tools.
Constantia Estate in Cape Town. and act timeously regarding rating
Numerous items and services will be decisions. Fintech has identified the mining and
on auction at the formal event as construction industries as a sector
we raise funds for the orphaned and The license means GCR is now that could benefit from tailored
vulnerable children in Imizamo Yethu, registered in accordance with Section financing packages. They are able
Hout Bay. 5(1) of the Credit Rating Services Act, to work directly end users or with
24 of 2012. The application process for their chosen suppliers, such as heavy
the license can be described as nothing duty equipment businesses, enabling
less than highly stringent and vigorous, companies to run at their best and
but GCR believe that this process was where it counts the most.
of the utmost importance and one that
they fully support. ABSA WEALTH AND INVESTMENT
MANAGEMENT GROWS ASSET
The new regulations will also ensure a MANAGEMENT TEAM
high degree of transparency regarding Absa Wealth and Investment
internal processes and provide the Management has appointed Dr Nesan
market with comfort that GCR adheres Nair as portfolio manager in its private
to stringent corporate governance client asset management team.
principles. Nair has over fifteen years financial
services experience and joins Absa
With ratings agencies playing a hugely from FNB Private Clients, where he
important role both locally and abroad worked as portfolio manager for five
in assisting investors, fund managers years. He holds a PhD in Statistics
and other stakeholders in assessing and is a member of both the South
relative credit risk across industries and African Institute of Financial Markets
sectors, GCR as a company embrace and the South African Institute of
regulation and look forward to working Stockbrokers.
with the FSB as the regulatory body
These children live with the effects of overseeing operations. Nomkhita Nqweni, Chief Executive,
poverty, HIV/AIDs, and poor education Absa Wealth and Investment
EARTHMOVING FINANCIAL Management, says Nesans
this is where iKhaya le Themba
SOLUTION considerable experience, particularly
comes in. Three integrated programs
EJS Projektes recent acquisition of a with high net worth individuals,
ensure these children and their families
Doosan 30 ton articulated dump truck complements that of the current
are supported and empowered as they
was made possible through a finance investment team.
reclaim their dignity and hope for a
solution by Fintech. This enabled them
better future.
to deliver against their 5 year contract The above mentioned team is
If you or your company would like to with Mintails Mine. Fintechs recent part of the Wealth and Investment
get involved in this very worthy and decision to expand their financing Management business unit which
highly successful initiative, please send options into specific market sectors has was recently formed through
me an email tony@cover.co.za. allowed for the leasing of heavy duty the consolidation of the Wealth
industrial equipment. Management and Investment
GCR AWARDED CREDIT RATING Management businesses of Barclays
SERVICES Erika Scherman, Technical Financial Africa Group Limited, offering retail and
The Financial Services Board (FSB) Accountant at EJS Projekte & EJS institutional clients access to a wide-
recently awarded Global Credit Ratings Earthmoving, says that they needed ranging set of investment solutions
(GCR) their Credit Rating Services the finance for the truck in a short and philosophies across the various
License, making them 1 of only 2 period of time and were impressed at investment divisions.
agencies currently registered by the how quickly the deal with Fintech was
FSB in South Africa. finalised. They had the opportunity Nairs appointment comes shortly after
to develop with Mintails Mine, now the appointment of Armien Tyer as
Marc Joffe, CEO at GCR, believes that Fintech is their finance partner. Head of Absa Wealth and Investment
the award of the license will improve Fintech and EJS are already negotiating Managements Investment cluster in
the competitive landscape and a second heavy duty equipment lease December, covering active, passive
create a level playing field with their transaction. and alternative asset management.
competitors, while also enabling a Armien is an expert investment
further broadening of their market. Glen Chistopulo, CEO of Fintech said professional, having fulfilled the
that through their latest interactions role of Managing Director at Sanlam
Operating in South Africa for around with EJS Projekte, they are motivated Investment Management for six years
20 years, GCR are the only agency to refine their knowledge of this and served on the board for seven
with South African origins and have industry sector even further. Heavy years.
the largest analytical team on the duty equipment is costly, and Fintech
ground. This is important in terms of free up working capital for businesses

94 COVER MARCH 2014

Mar 14.indd 94 2014/03/11 3:31 PM

 Product Development

ACE LAUNCHED CASUALTY CAPABILITIES IN SOUTH Firedart derives inspiration from such thinking and our
AFRICA recent decision to discontinue the Construction Guarantee
ACE Group announced on 14 February the launch of its Underwriting Division and focus on engineering is one such
new casualty insurance practice in South Africa and the example of how we subscribe to progressive change in our
appointment of Lee Stacey to the role of Head of Casualty, business.
South Africa, as it continues to build its underwriting
proposition for corporate clients across the country. Firedart will be changing its name from Firedart and
Construction Guarantee Underwriting Managers to Firedart
ACE will enter the casualty market providing insurance Engineering Underwriting Managers. Our branding and logo
solutions for companies across industry sectors. As Head has also received a makeover as a result.
of Casualty, Lee will increase ACEs presence in the local
insurance market focussing on public liability, products Firedarts proud history of 13 years in underwriting
liability and pollution coverage. Reporting to Gary Jack, Chief engineering business was started by Mike Tandy on 1 May
Operating Officer for ACE in South Africa, she will be based 2001 and Ian van Loggerenberg joined in February 2003.
in ACEs Sandton office with immediate effect. Our products are tailored made solutions for all types of
engineering risks and include Contractors All Risks, Advanced
Lee joins ACE from Zurich Insurance PLC in London, bringing loss of profits, Plant All Risks, Machinery breakdown, Loss
with her 20 years of insurance industry experience. Lee of Profits, Deterioration of Stock, Works Damage, Electronic
started her career at Gallagher Heaths broking motor, A&H, Equipment and Dismantling Transit and Erection.
terrorism and casualty risks and spent a further eight years
Market conditions in the guarantee sector have called for us
as a major risks casualty placement specialist for Marsh
to revisit our product portfolio and to offer only engineering
before moving into underwriting in the global corporate
solutions with effect from January 2014. Engineering is a
casualty team at Zurich. While at Zurich, Lee was seconded
niche in the insurance market that we are passionate about,
to Johannesburg in 2012 which gave her insight into the
have excellent understanding of and have excelled in for over
South African legal and technical environment.
a decade. With our refreshed brand and focused underwriting
Gary Jack, Chief Operating Officer for ACE in South Africa, approach we are equipped and are positioning ourselves
said: for the growth opportunities spurred by infrastructural
ACE was built on its strength as a casualty market and this is development locally and elsewhere on the continent.
still a core component of our global underwriting offering today.
Please contact either of the two Executive Directors of
The appointment of Lee is therefore another important step
Firedart, Mike Tandy or Ian van Loggerenberg, who are
for us in South Africa as we continue to progress our strategy
qualified engineers and are willing to assist you with any
of increasing our product range locally in alignment with ACEs
engineering insurance related requirements.
global offerings. Lees vast technical and underwriting experience
is an asset as we build our presence in this important sector of
the market. We wish her well in her new role.

A FRESH AND FOCUSED LICK OF PAINT FOR FIREDART

Mike Tandy, Managing Director of Firedart

As the famous French philosopher, Henri Bergson once said,

To exist is to change, to change is to mature, to mature is
to go on creating oneself endlessly.

COVER MARCH 2014 95

Mar 14.indd 95 2014/03/11 3:31 PM

 SAUMA Zurich Camargue
TERSIA DAVEY MERCIA WALLIS SEONITA AVERY
CEO Head: Motor and Personal Lines Claims Manager

AIG Artinsure Artinsure

JOSE VAN ROOYEN ALAIN CLARK-MILLER HARRY KELLERMAN
Profit Centre Manager: Global Casualty Cape Town Representative Kwazulu Natal Representative

Marsh Africa Marsh Africa Marsh Africa

ANDRE NAGEL ANDREW PANZERA MICHAEL MORAN
Valuations Practice Leader Head: Operations South Africa Head: Aviation Practice South Africa

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Untitled-1 1 2014/03/12 11:27 AM

 KINGJAMES 28087

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