The business of insurance
The annual Insurance conference at Sun City continues to grow from strength to strength, with more delegates, more speakers, and more international representation than ever before.
The annual Insurance Institute of South Africa ( IISA) conference at Sun City continues to grow from strength to strength, with more delegates, more speakers, and more international representaton than ever before.
“Strip things down, clear away the distractions and get back to basics.”
Being the premier insurance industry event on the continent, it is i a springboard to access the industry in Africa, and gives a good i indication of the growth of the industry in South Africa A and beyond beyond. This year’s theme, ‘ the business of insurance is insurance’ is a good reminder to strip things down, clear away the distractions and get back to basics. While there has been much negativity concerning soft markets, regulatory pressures and skills shortages, Peter Todd, outgoing IISA president reminds us that there is much to be upbeat about. The contribution of the insurance industry to the financial services sector in South Africa, and in turn, the sector’s contribution to the overall economy, is worth celebrating. While there is no doubt that the South African economy is under extreme pressure, and the negative GDP growth figures from the first quarter of 2014 (- 0.6 per cent) have caused serious concern, it is worth noting that the biggest positive contributors to economic activity included finance, real estate and business services ( 0.4 of a percentage point). Unfortunately, this was not enough to counter the negative impact of the mining and manufacturing industry, but provides a glimmer of hope nonetheless. In fact, finance, real estate and business services contributed 21.1 per cent to the country’s GDP in 2013 – more than any other single sector.
The economy has, and will continue to shift. The focus for South Africa is to become a knowledge- based economy, with a greater focus on technology, e- commerce and financial and other services. Since the early 1990s, economic growth has been driven by the tertiary sector - which includes wholesale and retail trade, tourism and communications. The key sectors that contribute to the gross domestic product and keep South Africa’s economic engine running are manufacturing, retail, financial services, communications, mining, agriculture and tourism. And insurance is required to protect all of these. While there were no great shakes expected from President Jacob Zuma’s State of the Nation speech on 17 June, he did place focus on economic growth, however, it was disappointing that there was not much emphasis on financial services as part of this. “We will continue to invest in education and skills development as that is the key to economic growth and development. We need engineers, electricians, plumbers, doctors, teachers and many other professionals to build our country’s economy,” said Zuma in parliament. No mention of those who insure and cover the citizens of this country, like the engineers and their projects, or the doctors and their patients. Realising that insurance professionals are not in this job for recognition from the government ( that might be nice, but don’t count on it), they should at least know that they are valuable contributors to the economy, creating employment and generating investment. And most importantly, giving South African citizens peace of mind in a sometimes very scary environment, and protecting them from financial disaster.
The sad truth is that with the unemployment
levels where they are in South Africa A ( about 36 per cent of f under 35s are said s to be unemployed, while the he official officia unemployment rate was at 25.2 per cent in 2013), there are more people turning to crime. While Crime Stats SA reported a drop in overall crime in 2011 and 2012, the numbers were up again in 2013. This, in turn, has an influence on claims stats in the insurance industry. And, tough as things may get, insurers continue to pay claims, they reiterate to RISKSA. Come hail or high water. The ones who don’t, will fall by the wayside, and the ones that do will continue to gain the trust of underwriters, intermediaries and consumers, and will continue to prosper, and in turn create jobs and stimulate the economy.
Because the financial services sector has become a cornerstone of the economy in South Africa, regulating it has become ever more important. Regulations governing the financial sector, and particularly risk management, have undergone considerable refinement to align them to internationally recognised standards and best practice. Regulation is undoubtedly the most often bemoaned topic of conversation at any an insurance industry event. The creeping costs of compliance weigh heavy on companies large and small, and regulatory exams have even been said to have forced some people out of the industry altogether. However, as many CEO’s of companies have told RISKSA, these regulatory challenges will be overcome, and the opportunities that they bring about will be taken advantage of. The resilience of the industry will be tested, but the strong and the innovative will survive. The 2014 IISA Insurance Conference presents the perfect platform for industry stakeholders to discuss these challenges and brainstorm the solutions that will carry the industry forward. The one topic that is sure to come up is that of Retail Distribution Review ( RDR), as it elicits serious concern, particularly from independent financial advisors ( IFAs). Altrisk MD Michael Blain reiterates that the key point in the fee debate, is that the RDR has come about as a direct result of the aggressive pursuit of growth and financial gain at all costs, which goes directly against the principles of sustainability and consumer protection embodied in insurance and FAIS legislation. “Whichever way RDR may go, we must ensure that independent brokerages are able to appropriately prepare for such regulatory changes while ensuring that their businesses remain solvent and profitable. If we truly value independent advice, we need to lobby and engage with the representative bodies to ensure that IFAs don’t get lumbered with draconian laws that hold the threat of many unintended consequences. IFAs cannot be left alone to fight for their right to survive. As product providers, we need to stand up and make right by the industry, the advisor and the consumer. It’s time to focus our energy on building a sustainable, professional and respected financial services industry that values independent advice and to stamp out self- interest and greed,” emphasises Blain. Again, the Insurance Conference presents the perfect opportunity for precisely this type of engagement with regulators, associations and representative bodies. Todd highlights that the conference allows the chance for great debate and question and answer sessions, because speakers are willing to interact openly with delegates. Take advantage of these opportunities. If there is one overwhelming response that RISKSA received while compiling this Insurance Conference special issue, it is for delegates attending the conference to learn as much as they can, network as much as they can and build up the relationships that will boost their businesses. Insurance is at the heart of the South African economy, and the annual conference is truly at the heart of the insurance industry – make the most of it.