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Moonstone Monitor - 1 November 2018 |
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Read Moonstone Monitor for CPD
purposes
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The only way to make sense out of change is to plunge into it,
move with it, and join the dance - Alan Watts |
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Distributed to 51,761 subscribers.
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From the Crow's Nest |
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South African Short-term Insurance – what are the latest
trends, drivers and challenges? |
A question that more than one research house asked and surveyed in the
last few months.
In today’s rapidly changing environment, identifying trends in your
industry, market and customers can give you a competitive edge. Research
findings and reports give you access to data and information that assist
you to make informed decisions.
Insight Survey, Accenture and PwC presented survey reports that all
indicated, in some way or another, that digital technology is radically
changing the behaviour and expectations of consumers and it is also a
major driver for growth within the Short-term insurance industry.
Let’s look at this similarity and other findings:
1. Low profitability, increased premiums and digitalisation
Insight Survey’s SA Short-term Insurance Industry Landscape Report 2018
describes the market drivers and restraints as well as the relevant
global and local market trends to present an objective insight into the
South African Short-term Insurance industry environment, market
dynamics, and its future.
Globally the Short-term Insurance markets, including South Africa,
remain in a phase of below-average profitability. Although the South
African Short-term insurance market holds 44% of the African market, it
has shown weak growth in 2017, mainly due to political uncertainty and
slow economic growth.
The report also shows that serious devastation caused by major natural
disasters in 2017 further contributed to lower profitability of the
South African Short-term Insurance market players. However, there seems
to be cautious optimism for the situation to improve in the near
future.
Despite the low growth in 2017, insurance premium volumes increased by
17.8% between 2016 and 2017, and the potential exists for Short-term
Insurance providers to significantly increase their gross premiums by
2020. Market players surveyed in South Africa and other African markets
are anticipating reasonable growth in both the life insurance- and
Short-term Insurance markets over the next three years.
The major trends and drivers currently set to drive growth within the
local market are centralised around digitalisation. Such trends include
the use of drones in the commercial and non-commercial sector,
collaborative digitisation between tech companies and insurance
companies and AI-powered Insurance.
However, the market is also expected to face major challenges over the
next few years as indicated below. As a result, growth will
ultimately be dependent on market players’ flexibility to adapt to the
changing market environment, and it will be imperative for local players
to take economic, social transformation and the risks associated with
climate change into consideration going forward. Furthermore, regulatory
developments are also set to profoundly impact the local market and the
potential costs associated with abiding by these regulations is expected
to have a negative impact on the market.
2. Technology and data most important trend
The PwC Africa Insurance Survey also strived to remind insurers of the
key trends that are changing insurance markets, both globally and across
Africa.
In this survey, technological advances also moved to the front of
insurers’ minds. The survey found that technology and data are now
considered the most important global trend disrupting the industry, but
they are also increasingly being used by the industry to accelerate
growth.
Despite the slowed down economic and insurance sector growth, Africa’s
insurance market remains one of the least penetrated in the world and
the opportunities for growth are huge. Africa’s CEO’s who were surveyed
expressed a willingness and readiness to continue to grow in the
changing environment.
3. Preference for digital solutions
To further complement the findings, the Accenture survey posed the
question: is the Short-term insurance market ready for digital
disruption? The Accenture survey tested customer sentiments and
perceptions, their behaviour and preferences in terms of communication
with insurance providers, and their responses to digital offerings and
insurance value propositions.
The survey results showed a clear preference for digital insurance
solutions, and readiness for digital engagement. However, insurance
providers will need to do more than just make digital an additional
channel of distribution. Digital needs to be embedded into systems and
processes.
An important conclusion from all these surveys is that the industry will
have to re-imagine business services and solutions around the customer,
especially in the light of increased focus by the regulatory authorities
on the fair treatment of customers.
The Short-term insurance industry’s successes will be measured in how
these challenges and opportunities, that the digital disruption presents,
are confronted.
Are you ready and aligning your actions yet?
In our Technological Speaking article we will further unpack some of the
key Accenture insights. |
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Your Practice Made Perfect |
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Charging fees for “other” Short-term Insurance services |
The charging of fees in the Short-term space, and particularly the
so-called “administration fee”, has always been a bone of contention in
the industry. Many elected to simply follow the ostrich approach and
charge clients for doing something for which they are already
compensated via commission, but this may not be the wisest move, going
forward.
Rule 12.4.1 of the Policyholder Protection Rules (PPR), which comes into
effect on 15 December 2018, is very specific in what is required before
a client can be charged such a fee:
An insurer may not facilitate the deduction or charging of any fee
payable by a policyholder to an intermediary or any other person, unless
the insurer has satisfied itself that the amount and purpose of the fee
have been explicitly agreed to by the policyholder in writing, and that
it appears from such agreement that the fee -
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relates to an actual service provided to a policyholder;
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relates to a service
other than rendering services as an
intermediary; and
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does not result in the intermediary or other person being
remunerated for any service that is also remunerated by the insurer.
Please note that this now places the onus on the insurer as well to see
that the rules are obeyed.
In particular they must ensure that “…the amount and purpose of the fee
have been explicitly agreed to by the policyholder in writing."
In my view, “administration” is not an actual service, and forms part of
rendering services as an intermediary for which commission is paid.
Take these pearls of wisdom from Joan Baez as a musical guideline:
You who are so good with words, and at keeping things vague
If you’re offering me diamonds and rust, I’ve already paid.
Remember, you and your insurer have to resolve this matter by 15 December. |
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Client Confidentiality when transferring business
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A recent Moneyweb article highlighted the importance of treating client
information with great circumspection.
A product house included personal client information in court
documentation in an urgent application. The article pointed out that
these documents are available to the public, and could have been used
for the wrong purposes.
Fortunately, this did not happen, and the product provider could arrange
for the documents to be sealed. We pointed out that, apart from the
General Code of Conduct requirement that client information may only be
shared with prior written consent of the client, there are also POPI Act
provisions.
FSCA FAIS Notice 75 of 2018, published on 30 October, sheds more light
on this matter.
Background
In September 2017, PSG Konsult acquired a part of the Absa Insurance and
Financial Advisers’ (Aifa) unit, the commercial and industrial
Short-term insurance brokerage. In February 2018, it purchased the
remaining stake.
This was not just a mere transfer of business. The two parties applied
successfully to the FSCA for an exemption to ensure compliance with a
number of legal requirements, including section 3(3) of the General Code
of Conduct as well as the POPI Act.
Extent of exemption and conditions
Both parties are subject to a number of conditions, many relating to
replacement conditions, which this in fact is.
This exemption is an excellent guide for those contemplating taking over
someone else’s book, or selling theirs.
Click here to download a copy. |
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Technologically Speaking
Moonstone Information Refinery
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Accenture survey – be digital and re-energise customer relationships |
One of the major findings of the Accenture Short-term insurance survey
was the identification of five strategic imperatives that will help
insurers meet changing customer demands and leverage new
opportunities. These will also help create a foundation for
participation in a fully digitalised business environment.
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1. |
Be accessible
The survey found that customers: |
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Do not find their insurers easy or convenient to deal
with |
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Are gradually shifting to digital channels |
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Do not use social media to interact with insurers |
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The survey results show that customers want to interact with
multiple channels, with the human element still playing a big role
in the interactions with older and middle-aged customers.
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2. |
Be trusted
Trust and transparency are major concerns for insurance customers
and should be given strong focus. |
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Banks and retailers are perceived as more trustworthy
than insurers |
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Customers need reassurance that their data is secure and
protected |
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More than half of customers can be incentivised to share
personal data |
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The survey showed that customers broadly understand that insurers
need more personal data to provide personalised services. 65% of the
surveyed customers said that they will share their personal
information if they feel that it is secure and they can control
what, when and how it is used.
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3. |
Be responsive
The survey results indicated that two thirds of customers are
satisfied with their insurers. However, the survey found that a high
propensity will switch insurers despite high level of satisfaction.
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4. |
Be relevant
To stay relevant, insurers will have to understand the needs of its
customers. The majority of customers surveyed are actively using
apps and devices that use location data and online activities to
provide them with relevant services.
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5. |
Be smart
Although there is high awareness of digital offerings such as
telematics, the usage is still very low. Smart solutions can present
insurers with significant advantages, but will require building
strong partnerships and securing the trust of customers. |
Click here to download the Accenture survey results.
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Regulatory Examinations
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Fit and Proper Regulatory Exam
Requirements |
Fact: The competence requirements
relating to regulatory examinations determine that all FSPs, key
individuals and representatives should write and pass the relevant
regulatory exams.
Question: I am a KI and a representative. Which exam should I write?
To provide some clarity, let’s recap Board Notice 194 of 2017 that
contains the necessary information on who should write which exams.
Who are exempted from writing the REs?
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(i) |
a Category I FSP, its key individuals and representatives that are
authorised, approved or appointed only to render financial services or manage or
oversee financial services in respect of the financial products: Long-term
Insurance subcategory A and/or Friendly Society Benefits; and |
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(ii) |
a representative of a
Category I FSP that is appointed only to — |
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(aa) |
perform the execution of
sales in respect of a Tier 1 financial product, provided
that the requirements in section 22(b)(ii) are complied
with; and/or |
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(bb) |
render financial services
in respect of a Tier 2 financial product. |
Regulatory examination requirements
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(1) |
A Category I FSP, its key individuals and representatives must
successfully pass the applicable regulatory examination listed in Column A of
Table A. |
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(2) |
A
Category II FSP, its key individuals and representatives must successfully
pass the applicable regulatory examination listed in Column B of Table A. |
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(3) |
A Category IIA FSP, its key individuals and representatives must
successfully pass applicable the regulatory examination listed in Column C of
Table A. |
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(4) |
A Category III FSP, its key individuals and representatives must
successfully pass the applicable regulatory examination listed in Column D of
Table A. |
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(5) |
A Category IV FSP, its key individuals and representatives must successfully
pass the applicable regulatory examination listed in Column E of Table A. |
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(6) |
An FSP, a key individual and a representative must successfully pass the
applicable regulatory examinations before that person's authorisation, approval
or appointment. |
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TABLE A |
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Column A
(Cat I) |
Column B
(Cat II) |
Column C
(Cat IIA) |
Column D
(Cat III) |
Column E
(Cat IV) |
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FSP |
RE 1 |
RE 1; and
RE 3 |
RE 1; and
RE 3 |
RE 1; and
RE 4 |
RE 1 |
Key
Individual |
RE 1 |
RE 1; and
RE 3 |
RE 1; and
RE 3 |
RE 1; and
RE 4 |
RE 1 |
Represen-
tative |
RE 5 |
RE 5 |
RE 5 |
RE 5 |
RE 5 |
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Previously, a sole proprietor was obliged to write both the
RE 1 and RE 5 (for representatives). Such individuals now
only have to successfully write the KI RE 1.
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A KI, who also performs the functions of a
representative, have to pass both the RE 1 and RE 5.
The Moonstone website,
www.moonstone.co.za contains a wealth of regulatory examination
information, including tips on writing the exams. Please feel free to
browse there to your heart’s content.
Our registration call centre is available weekdays during business hours
(08h00 – 16h00). Contact 021 883 8000 / 888 9796 or e-mail
faisexam@moonstoneinfo.co.za. |
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Schedule for 2019 |
Please note: Registration cut-off is 11 working days before date of exam. |
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Careers Platform
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Featured Positions |
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Insurance Sales Team
Manager:
mrpmoney, Durban
- We are looking for a self-motivated, passionate Insurance Sales
Team Manager to join our fast-paced team.
Read More
-
Short Term Insurance
Representative:
JFA Short Term Brokers, Milnerton
- The candidate will be responsible for all client services
tasks (primarily personal lines but not limited to this) in a short term
insurance practice.
Read More
-
Financial Advisors:
Multivest Financial Planning, several areas -
We are looking for candidates with at least 3 years experience in
selling Life Assurance and Investments.
Read More
-
Wealth Account
Manager:
Old Mutual, Durban
- If you have an applicable tertiary qualification and a proven
track record at a top end Investment Practice, we would like to hear
from you.
Read More
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In Lighter Wyn |
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Tel: +27 21 883 8000 | Fax: +27 21 883 8005
info@moonstoneinfo.com
www.moonstone.co.za
P.O. Box 12662, Die Boord, Stellenbosch, 7613, Republic of South Africa
Disclaimer:
Services and products advertised by external product suppliers in
this newsletter are paid for by the respective suppliers. Moonstone
does not endorse any opinions, conclusions, data, products, services
or other information contained in this e-mail which is unrelated to
the official business of Moonstone and furthermore accepts no
liability in respect of the unauthorised use of its e-mail facility
or the sending of e-mail communications for other than strictly
business purposes.
The complete disclaimer can be accessed
here.
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©2015 Moonstone. All rights reserved. |
