Regulation tops risk for insurers
THE greatest risk to the insurance sector is regulation, according to PwC’s latest Banana Skins survey.
The survey shows executives of insurance companies spend 65% of their time dealing with regulatory-related issues instead of serving customers.
This is the third time regulation has topped the survey results as a risk for the sector.
The survey noted that the burdensome regulations could also distract management from the urgent task of running profitable businesses at a time when the industry is under stress.
Most insurers lament the pace of change and volume of the new rules, which add to the cost basket for these companies. And the verdict is also out on whether regulators such as the Financial Ser- vices Board (FSB) have bitten off more than they can chew.
“Some of the regulations are not complementary,” PwC’s actuarial leader Mark Claassen said. For instance, Financial Intelligence Centre Act regulations aim to ensure that companies contact and communicate with clients appropriately when needed.
The Treating Customers Fairly requirements are similar, resulting in duplication.
Santam CEO Ian Kirk said the industry would continue to see a number of regulatory changes to both improve the supervision by regulators and bring South African regulations in line with international standards. He also said the group would take a pragmatic approach to ensure that all the relevant stakeholders, specifically policyholders, were protected.
Sanlam’s CEO Johan van Zyl said the PwC survey results were not surprising. “I am not convinced that regulation alone is the solution to all the industry challenges.
“Where we do have regulation, it is imperative that it is appropriately designed to address the unique challenges that exist in our local environment rather than a mere replication of regulations that exist and are more suitable for other markets,” he said.
Regulation can be fairly intrusive, according to Van Zyl, with very detailed and specific legislation around products, profit, commission structures and how and where money can be invested — “sometimes with little or no benefit for the very clients it is intended to protect”.
Other risks facing the insurance sector according to the report include failure to attract and recruit the right talent, crime and the uncertain state of financial markets and the world economy.