Centriq shows support by hosting diaper drive

Centriq Insurance recently donated two trollies filled with baby consumables and previously-loved baby clothes, bedding and bags to COMPASS Community Provision and Social Services.

“We are very much aware that caring for a baby is no easy feat as it entails much more than just being a parent, mentor and financial provider. We wanted to be a part of the difference COMPASS is making by donating much needed items to the little ones in need,” says Caryn Talmage, who heads up Centriq’s CSI team. By providing abused or abandoned babies, children and women with shelter and care in a dignified home environment, COMPASS gives these precious human beings a second chance in life.

Published in FA News edition June 2016 “Centriq shows support by hosting diaper drive”

RiskAfrica – June 2016 – Rocking events cover

At the same time, the industry itself I thriving. Live music revenue will grow at a compound annual growth rate (CAGR) of 7.9 per cent in the next five years, reaching R1.5 billion in 2019, up from R1.0 billion in 2014. In line with its recorded music sector, South Africa’s live music industry is also more similar to a Western-based model than that of its African neighbours, where a small number of large promoters dominate and are behind most of the big-name acts, according to PwC: Entertainment and media outlook: 2015 – 2019 South Africa – Nigeria – Kenya. Given its increasing prominence on the local music scene, Denise Hatting, authorised representatives of KEU Underwriting Managers, explains the process of underwriting a multi-peril and complex event such as a rock concert.

The first risk management tool that you use is the proposal form, which the broker uses to provide us with information to understand the type of event. The event organiser will then specify if they have an internal or external safety officer appointed. For the bigger events it is a requirement, as the Joint Operations Committee (JOC) together with the municipality allocates a safety officer for your event. Once the insured submits a safety plan with procedures through JOC, they are supplied with a risk rating for the event.

On the bigger events, we pre-appoint a risk surveyor, who will meet with the safety officer to go through the various aspects of the event: from specific requirements to what needs to happen if there is bad weather and you need to postpone the event. Loss adjustors are pre-appointed as well; so the insured is never left on their own to make a decision, and if a claim arises they already know exactly what they are covered for.

We underwrite each event differently, depending on the circumstances and criteria. So if we are looking at an exterior event, we first need to consider if a stage is covered. If the stage is covered on three sides with a roof, you can then handle some rain with your first concern being the performers on the stage and the electrics.

The next question is who is so important to the event that without this person the event will not take place. For a large international event, this is quite easy: it is the artist itself. However, often the artist has contractual agreements with local event organisers that say, ‘if something happens to my manager or guitarist then the event will also not take place’. You have to be very specific as to who these nominated people are to be included under the insurance cover.

Then if you have something like travel delays, owing to bad airport weather or strike action, you need to consider how this may affect people arriving in South Africa. Obviously, if they arrive on the day of the event, you have a bigger exposure which you may then make provisions for.

You additionally look at where and when the event is happening. For example, an outdoor event in the afternoon in summer in Gauteng puts you at a risk of a thunderstorm. Some artists then also have very specific criteria about the equipment that travel with them. It really depends on what you are insuring and what are the critical objects that are required for a successful event.

A local promoter will quite often have a contract with international promoters and all agents of the artist. For example, international promoter Live Nation operates in South Africa, having formed strategic alliance with local concert promoter Big Concerts, according to PwC.

They will, therefore, prescribe specific underwriting criteria (annually) with regard to liability, such as are you covering all of the subcontractors working on the event (e.g. the person setting up the stage). As a consequence, promoters need to understand the criteria of his contractual obligation and ensure it is followed through by the insurance policy.

Of course with the weakening rand, we are now seeing international acts requiring much larger sums (in rands) of liability cover, which is in turn increase the insurance cost to the event organiser.

It is essential, therefore, that both the broker and the event organiser understands exactly what is required in the contract in order to manage these risks and requirements appropriately.

The heart of it – the reason i love this industry

I was a kid in matric, with good grades, but without the financial means to further my education.

At the time I wanted to be a Chartered Accountant, and had applied for several bursaries. But then I was approached by an insurer who offered me a bursary to study something called actuarial science.

My journey

Fast forward four years later, I graduated and was working for an actuarial consulting company that consulted broadly across the financial services industry. I was fortunate enough to participate in various excercises that allowed me to get broad experience across banking, long term insurance and short-term insurance.

At the time, I remember thinking that with the various regulatory changes on the horizon, the relative short-term nature of the risk, the relative low number of actuarial resources in the short-term industry, and the constant changes that will provide me with plenty of excitement. I believed that the impact it will have on any of the decisions I am involved in will come to bear relatively quickly, and that there will be job security.

Privilege of influence

Several years later at the stage of 29, after two and half years as part of Centriq’s actuarial team, I was given the opportunity to become part of Centriq’s Senior Management team, during which time I have had the privilege of influencing the risk appetite and strategic direction of Centriq.

Insurance has given me an opportunity to build a career. However, at the heart of it – the reason I love this industry, is because we provide a service for a customer’s fundamental need for financial security.

Insurance is there to help our customers rebuild their lives and businesses after an incident that could otherwise have financial ruined them. In spite of the tsunami of regulation we are experiencing, the ultimate goal is to provide a stronger and more sustainable industry that has the confidence of our customers. I am proud to be part of an industry that serves such a purpose.

Count down to RDR implementation

While some sees this in a positive light, there is no time to sit back and do nothing. The time should be used to review the principals of RDR and the impact it will have on your business.

FAnews asked a few people in the industry what brokers and advisers can do to prepare for RDR and what precautions they can take to avoid any harsh penalties for non-compliance. We believe we have a good mix between the life, short-term and compliance fraternity to bring you a very balanced view.

Although D-Day for RDR keeps on changing, it is a reality, and will not go away. What exactly does a broker/adviser need to change as a matter of urgency to be compliant?

Cornea Matthee – Centriq Insurance

Financial advisers should determine how their businesses will respond to the proposed RDR changes and assess the impact of RDR. They should determine which category the majority of their current representatives’ fall and assess the sustainability of their business when it comes to operating as a tied adviser or an independent adviser. Financial advisers should also do a cost projection once the new fit and proper requirements are effective, taking the type of adviser agency model chosen into account.

They should assess and define all income streams, and brainstorm solutions to increase or replace it with new income streams i.e. outsources fees and broker fees. Brokers should assess current business practices against what they expect the regulator will no longer permit i.e. multiple registrations as a key individual or representative; and determine strategic solution once RDR is implemented.

Lastly, they should engage their compliance officer, obtain a legal opinion, and if possible – participate in any one or more of the FSB RDR implementation steering committee work streams and attend industry workshops.

What if the broker/adviser is not RDR-ready when it officially kicks in?

Failure to consider the proposed RDR competency framework on your current business model may result in non-compliance with the proposed new regulatory regime. This could result in a material contravention of a regulatory requirement which may consequently lead to your license being suspended or a fine being imposed by the Regulator. Given the time allowed to ensure compliance, you may not have an acceptable excuse.

How exactly do brokers/advisers who have not yet done it, change their business?

Start with your appointed compliance officer to assist you with managing the regulatory risks. Ask an insurance expert to guide you on the impact of the RDR proposals on your business model. Engage with your strategic partners i.e. insurers on whose behalf you bind / UMAs you have intermediary agreements with and find mutual beneficial solutions. And finally, but most importantly, start engaging with your customer base on where the industry is going, and what changes it will bring about – especially in relation to fees. During this stage, you should put forward the value proposition you will be offering to your customers in the near future.

The FSB has very specific views about outsourcing. What can we expect?

The FSB is of the view that stricter outsourcing controls are needed, particularly in relation to investment management outsourcing, which has been deferred to the next phase of RDR. A few of the expected outsourcing models include:

  • Advisers who hold binders to enter into (vary or renew policies will not be permitted to earn outsourcing fees for policy administration as this is implicit in the binder);
  • Other advisers may not earn outsourcing fees for policy administration, unless the parties are enable to prove administrative efficiency that enable real-time data capturing, for example through direct capturing on the insurer’s platform;
  • Fees for outsourced policy administration are expected to be capped. Although it has not been determined, 2% of the premium was initially proposed; and
  • Conduct standards for outsourcing is expected to be strengthened to further reduce conflicts and increase the quality of the insurer’s oversight.

Centriq harvesting the field

Cover spoke to Gareth Beaver, CEO, Centriq Insurance about the past decade and their growth from zero to now.

Centriq Insurance is turning 10 this year… And a successful 10 years that is, because they are reaping the fruits of their labour, persistence, resilience, dedication and commitment to sustainable insurance solutions. The market is tough yes, but Centriq is tougher. So tough that a report from the Ombudsman for Short-term Insurance rated Centriq one of 2014’s top 10 insurers in South Africa.

For two consecutive years, they received a Silver Achiever Award in Deloitte’s Best Company to Work for Survey. And in 2015, the Global Credit Rating Company gave Centriq an –AA investment grade rating for their claims payment ability. They are also hosting their 3rd Tour de Conference this year – a cycling event they launched to give back to the community – because at the heart of it all, Centriq cares about their business partners, customers, employees and the people of South Africa. This mind set, they incorporate into everything they do.

Centriq recently partnered with Tradesure and Affinity… Is the UMA model still central to your business model?

We do conventional insurance through UMAs – so yes, it’s still a key part of our business model. We have an amazing mix of UMAs and we will continue to expand our portfolio.

How are the smaller underwriters doing amidst the heavy economic pressure?

The harsh reality is that the smaller UMAs, especially those that do not focus on a niche or specialist market segment are currently battling to survive under the weight of the current battling to survive under the weight of the current difficult economic environment. Similarly, the larger insurers, which have benefits of scale and size, but not the portfolios that include a material amount of specialist market business, are not generating very exciting bottom-line returns for their shareholders at the moment.

What are the secrets of those that are still doing well?

Generally, the UMAs that are still doing well are those that underwrite a specific niche line of business. As a result, their expertise is deployed in the underwriting of each and every risk where the premium being quoted is sold by the intermediary at a price that reflects the value of the cover the client’s needs.

Specialist insurance is clearly an essential part of the industry and independent brokers’ business. However, we see a move to bring more of these specialist underwriters closer to the corporate structures. What is your opinion on that?

This dynamic is being driven by several factors – one being the need for greater insurance carrier to exercise a greater degree of control and influence over their outsourced business partners to meet the ever increasing governance and regulatory requirements imposed upon insurance carriers. Secondly, as many of the founding entrepreneurs who established these specialist UMAs near retirement, they wish to reduce their work commitments, but their financial exit plan can hardly be afforded by their junior successors in the UMA. And so the insurance carrier often jumps in to acquire the equity. In doing so, they bring these UMAs closer to their corporate structures.

When it comes to the value of advice, what do you think the real value is and how do you prove that to the client?

Advice is only valuable if it turns out to be good advice – bad advice is worse than no advice at all! Good advice, I believe, can only come from someone with experience; someone who is not conflicted in terms of an incentive or reward that may compromise the advice in their favour and at your expense. While you can prove these two aspects to a client, the fact of the matter remains that it is generally difficult to easily quantify the value of good advice. However, the cost of bad advice is usually simple to quantify – most times the experience is in actual rands and cents. When something goes wrong due to bad advice, the cost will become known. When nothing goes wrong due to continued good advice, the value thereof in not easily determinable. This is the challenge that advisers deal with, and for which there is no simple answer. Providing it to a customer is therefore difficult.

What is your favourite part of being a leader?

Most definitely when you see people in your team shine and achieve things through challenges and exposures which they may not ordinarily be expected to deal with – it’s very rewarding indeed.

If you can change one thing in the industry today, what will it be?

The fundamental structural weakness which promotes, encourage or demands that brokers are of little worth unless they obtain a premium price reduce to levels which knowingly will result in a loss for the insurer and possible insufficient commission for the broker and renewal or when taking on a new account. Think about this for a while – we all have a favourite restaurant that we probably have been going to year after year… have we ever seen the prices on the menu go downwards from one year to the next? No – but we keep going back. Why? Because we value the food and the experience and we know that the cost of the food and beverage which the restaurant owner buys goes up each year. And so we pay the higher price, provided we still experience the same value.

Good insurance cover from a good insurer has value and if the cost of continuing to deliver that value goes up each year, then why are industry participants discounting the price below the value thereof?

Back to the future for UMAs

Stef Theofanidis, managing directors of Hollard Insurance Partners, says this hurt the insured, as to some degree conflict of interest arose when the agent of the insured (the broker) was replacing the function of the UMA (the agent of the insurer).

“Binder regulations put brokers in a position where they could ask for additional fees from insurers alike for the functions they carry out on behalf of the UMAs and risk carriers, thereby squeezing the margins of the UMAs,” explains Isaac Chindotana, portfolio manager at Lireas Holdings.

Martin Le Roux, managing executive at Centriq Insurance, says one of the hardest hit segments of the industry has been that of the underwriting managers, who have come under pressure from a multitude of angles. “These include the pressure associated with being price takers in a softer market whilst not having the scale required to weather the claims increases; losing out on, in some cases, a significant portion of their income with the demise of the so-called ‘above the line’ (debit order type) fees a few years ago and the proliferation, in recent years, of broker binder facilities that have either caused them to lose that business entirely or be prepared to sacrifice some of their own earnings to pay the broker a binder fee in order to meet deal terms that brokers are being presented with,” he adds.

“Attracted by higher binder fees, we have seen brokers in the market moving books of business from their existing risk carriers to an insurer that has offered them higher fees, impacting the margins and, in some cases, the sustainability of some business. The lack of clarity and time to implantation has also hampered and/or delayed a number of strategic decisions that some businesses needed to make around mergers and acquisitions, restructured business models and product development,” says Chindotana.

“ The Retail Distribution Review (RDR) is now coming into play, which we see as a very positive move towards demarcating, again, what the true function of a broker is versus that of a UMA,” points out Theofanidis.

“RDR, in contrast to prior regulation, strengthens the business model, especially for commercial UMAs,” affirms Chindotana.

Tersia Davey, chairperson of the Soth African Underwritting Managers Association (SAUMA) explains that the body recently met with the SAUMA board, together with the Financial Services Board (FSB), and they again re-emphasised their member’s support for the proposal of RDR, specifically with regards to binders and outsource agreements. The FSB has assessed all commentary from the industry and they are working towards rectifying these unintended consequences and conflicts of interest by putting binders into right spaces, according to Davey.

“We expect RDR to be a game changer that potentially brings some equity to the ‘position of influence’ on policyholders as well as curb some of the practices that were not equitable and made medium-term planning difficult. We also believe that it will change the economic flows and responsibilities in the insurance value chain. Of special concern to us is the potential negative impact that RDR may have in our broker distribution network. As a UMA, we see RDR as a positive, while we remain conscious for some brokers,” cautions Chindotana. He adds that nevertheless regulations continue to place pressure, in various ways and to different extents, on role players in the insurance value chain, including UMAs.

Andre de Waal, managing director of Commercial Industries Acceptances (CIA), explains that in his view it is important to stress that there is no conflict of interest with the UMA, which exists to contribute to the wellbeing of the short-term industry by providing specialist expertise and knowledge. They also offer broker training which in turn helps brokers grow and respond to their customer needs. Therefore, a bright future for the UMA equates to a stronger industry landscape.

Bright future, but…

However, the future of the UMA depends on a few issues, says Theofanisdis. “We need to consider the availability of experts with specialist skills, which is really what the UMAs bring.

“The second consideration is the business risk of the specialist who wants to be an entrepreneur and run his own business. There is no doubt that business risk appetite has changed visibly since 2008, as people require a lot more security around income streams.

“The third consideration is the ability of specialists to bring a first to market innovation, as well as particular distribution networks that the insurer may not have.

“And then finally, the ability of that same specialist to attract and retain clients better than the insurer can achieve on their own, and, of course, at a very competitive cost. If these four elements are met, then I don’t believe UMAs will be a thing of the past,” explains Theofanidis.

“The issue for us is to have a sustainable model. At Stalker Hutchison Admiral (SHA) and other Santam-owned UMAs, we must have a value proposition as opposed to a price proposition. The rates are getting softer as capacity is becoming more abundant; which means that if you are only providing a product based on price it is possible that you don’t have a sustainable future. However, if you are producing a product based on value then you will not only survive, you will flourish,” says Gary Corke, CEO of SHA, explaining that he expects to see some new UMA entrants, arising due to niche opportunities in the market and not only from consolidation.

Lireas, who Chindotana describes as a pioneer of the agency model in South Africa, has seen UMAs come and go, but they believe nonetheless that UMAs will continue to be an important part of the short-term insurance industry where, from their experiences in the Lireas portfolio of the UMAs, the specialised, innovative and well-run UMAs have adapted, embraced the challenges and opportunities of the market and have, thus, continued to do well and grow profitable.

“There are many benefits that independent specialist product providers bring to the market, such as superior product knowledge, speed, innovative and customer centricity that larger, integrated in-house models have struggled to deliver to consumers for a long time. Brokers and policyholders alike enjoy the speed and superior product knowledge that experienced specialists bring to the market, and if anything the industry should be doing more to retain and transfer the skills and expertise of these specialists,” he explains.

According to Doug Laburn of Lambard Partnerships, the future of the UMA should also be considered on a case-by-case basis, with many aspects relating to retaining your competitive advantage (being better than the rest) in order to prosper from a financial point of view.

Firstly, you need to look at differentiation, which goes back to the original value proposition of the UMA. If you are able to do something differently in a way you underwrite and distribute, your value may increase even further- as we are seeing with specialist classes that are retaining their competitiveness while those in personal lines are starting to struggle to remain sustainable, according to Laburn. “Having said that, an environment where a UMA is highly skilled and innovative engenders success in itself.”

“UMAs that provide commodity products and services, predominately in the personal lines, motor and commercial lines, may find it difficult to complete,” affirms Theofanidis. “In this case they will end up becoming bundled into insurers. We’ve seen some of that already; for example, Hollard has brought Aquarius in-house, which has since gone from strength to strength. We’ve also seen the likes of MUA Insurance Acceptances joining forces with Auto & General, which, I am led to believe, has been beneficial to UMA.”

Corke says that it is actually quite simple: for any UMA that truly adds value and can differentiate itself from other traditional insurers, the UMA model still remains completely viable.

The true specialist always has a future, bundled or unbundled

Corke doesn’t believe mergers and acquisitions activity in the UMA space is driven by regulation but rather by market forces such as changes in technology, changes to shareholders and economies of scale.

“I think that insurers will always make opportunistic decision when the time is right to engage with specialist in the form of the UMA, or try to bring specialist in-house,” elaborates Theofanidis, adding that in addition to the need for independent advice, strong and extensive partnerships are, and have always been, a cornerstone of the industry.

“UMAs have been playing a significant role in areas such as innovation and employment creation in the industry for close to 30 years now. Naturally, consolidating and ‘divisionalising’ some of the UMAs will take away some of this value and other attributes like entrepreneurship, which UMAs bring to the industry. We always expected a consolidation of businesses in the UMA space to occur at some stage,” says Chindotana.

Corke adds that even if there is to be a fewer UMAs in future, he thinks that product development and pricing will remain unchanged, owing to the abundance of insurance capacity out there.

“If a specialist is performing as strong as it is has been in the past and it wants to be more independent, the insurer would then look at a partnership; but if that specialist wants to work more closely with the insurer, they can continue to bring the skills and services to the market, but in a different setting,” Theofanidis explains.

“All the large insurers, including Hollard, have done abit of both. Santam, for example, has a range of wholly-owned UMAs (divisions) and then they have some partly-owned UMAs. Hollard, on the other hand, has moved to a model we term ‘centres of excellence’. These may take the form of in-house product houses and administrators, or independent UMAs, with varying degrees of ownership by Hollard.

“If we look at ourselves and the Santams of the world, the broker experience and feedback is very positive, whether the brokers are dealing with a wholly-owned Santam UMA or a Hollard centre of excellence or UMA, elaborates Theofanidis.

“In fact, part of Hollard’s founding strategy as a then small unknown insurer was to provide a licence, some working capital, bring strong business acumen and private equity methodologies, and partner with experts in their chosen field who could open up distribution and provide specialist products and services to the market. This model has stood us in good stead for many years and we are confident it will continue to do so in the future.

“Up until today, we still have a network of roughly 100 partnerships. They are not all UMAs of course; we partner with insurance companies, UMAs, brokers, banks, retailers and various entities right across the insurance value chain. Partnership continues to be a fundamental corner stone of the Hollard business model, despite the fact that we have become a large and competent composite insurer in our own right,” says Theofanidis. He explains that when Hollard entered the market in Australia and set up some very strong partnerships in niche lines of insurance, the broker market bought from these guys as happily as they did from composite insurers.

Laburn says that UMAs’ attitude towards partnership with the insurer has to be one of working together towards a common goal and not just trying to get the deal.

According to Theofanidis, the UMA is really about a business model and how two partners can engage with each other symbiotically, rather than what each can extract from one another for individual benefit only.

From the viewpoint of the independent UMA Chindotana adds that some specialists enjoy the entrepreneurial and operational autonomy that a large in-house operation does not always provide unbundling in future may thus be a possibility.

However, within a fast-changing legal and economic environment, the focused involvement and knowledge in the niche area of the UMA enables faster identification of potential new risks; allowing for timely introduction of suitable, relevant covers that provides the client with better protection, while unbundling defeats all of this and will make the offering less focused, in CIA’s opinion.

In their current form, UMAs have the ability to outperform the traditional insurers as it is more cost-effective for the end customer and not as expensive as an internal insurer’s division, according to De Waal.

All shapes and sizes but economies of scale count

According to Laburn, the smaller UMA is going to find it tougher than its larger counterparts in terms of operational efficiencies.

“There are benefits to scaling up to a certain point, including effective systems in place, well-managed compliance and having the necessary underwriting skills under one roof, as well as the capacity to leverage technology. As a result, we have seen some mergers and acquisitions activity in the industry,” explains Laburn.

Moreover, when you commoditise these areas, it is all about efficiency, according to Theofanidis, where business with large scale are normally (but not always) able to take advantage of operational efficiencies, and squeeze out margins, whereas others without scale logically can’t.

“There are insures out there who not only have the benefit of scale, but are also very heavily invested in technology and digital solutions, the design of innovative products (disruptor products), and, of course, a huge focus on optimising operations – obviously to satisfy and enhance the customer’s needs and experience. The investment in these key areas is not only a current trend in South Africa where we have lagged behind international insurers,” explains Theofanidis, echoing Laburn’s sentiments.

Corke says that the only true difference between the mall and large UMA is that the large UMA has been around for longer and usually has more experience, having experienced numerous market cycles.

“This doesn’t mean that a small UMA doesn’t have a future. If a small UMA has a unique selling a proposition, such as its products, the calibre of its staff, or the right distribution channel, they would remain pretty viable,” he says.

“To be successful in the underwriting space, you have to be sure that you are a true underwriter and specialist by operating in niche market that requires your unique skills. If you are not, and you play in an administrative capacity then the future might not look too good,” says Davey.

According to De Waal, the future of the UMA is what you make of it. If your business is specifically designed for the specialty concerned and you always remain focused on your core business, you will succeed.

Davey also ends with a positive message for the UMA fraternity and the clients they serve, explaining that the industry is seeing a lot of new underwriting managers emerging, which shows that new creative products are blossoming.

Centriq participate in Daredevil run

Walking alongside the road wearing nothing more than a purple speedo is probably one of the boldest and most daring things a guy can do. Well, not for the men of Centriq Insurance who participated on Hollard’s Daredevil run recently to create awareness around prostate cancer. Team Centriq at Hollard’s Daredevil run 19th February 2016.

Eenie-meenie-miney-mo

South African insurers often have financial interests in multiple UMAs. To debate whether this trend benefits the market or not, one first and foremost needs to have a basic understanding of what it means for an insurer to own or support a UMA.

Pieces of the puzzle

A UMA may be owned (i.e. equity ownership) by an insurer, and this ownership can differ from a minority ownership of less than 50%, to a majority ownership of more than 50% but less than 100%, to full ownership of 100%.

Across the industry, we find a multitude of different practices these days wherein some insurers:

  • insist on some degree of ownership of a UMA;
  • insist on majority ownership of a UMA;
  • do not want to have any ownership of a UMA; and
  • mix and match according to specific circumstances and opportunities in the market place.

Having said that, we are also seeing many UMAs in which an insurer has zero percent ownership, which means that the UMA has simply entered into a mutually beneficial business partnership with the insurer.

Supporting one or more UMAs

A question I would like to address is how the competitiveness of a UMA is impacted by an insurer that supports one or more UMAs.

In my opinion the support of more than one UMA by one specific insurer (by means of equity ownership or not) does not curtail the competitiveness of the UMA at all seeing that:

  • Each UMA effectively runs as a stand-alone ‘mini-insurer’ with separate levels of underwriting capacity; reinsurance treaty structures; bespoke product design and covers; individual pricing modes; bespoke claims service; individual corporate culture and specific operating systems; and
  • The market benefits from the unique proposition of each UMA as it gives greater access to choice.

There are insurers who are known for having a multitude of different UMAs. Most of these UMAs, however, do not compete in the same market space – whether by class of business or due to some niche within the same class of business. Therefore, each UMA can be seen as a separate competitive entity in the market, even though each one of these UMAs are tied to the same insurer.

In certain instances where UMAs do compete in the same market space (i.e. same class of business, similar product and target market), many specific and tangible differences (as mentioned above) do exist within each one of the UMAs. As such, the competitiveness between the competing UMAs is not compromised in any way.

Distinct competitive edge

Insurers that truly understand and are comfortable with the UMA business model will appreciate that each UMA needs to represent and deliver on the aspects that make them unique – this is what gives the UMA, as well as the insurer on whose license it is trading on, a distinct competitive edge.

An insurer that wishes to position and enforce its brand, culture, pricing, claims service, systems, etc. into any of its UMAs, is probably not best suited to operate a UMA business model.

In my opinion, despite the concentration of UMAs being attached to fewer insurers as industry consolidation continues, there are still many independently operated UMAs.
Therefore, the market still has a wide degree of choice. In actual fact, there may still be too much competition in the market place as we are seeing many UMAs giving discounts on premiums to levels where combined ratios do not produce sufficient return on capital. In these instances, important choices have to be made about the future sustainability of the respective brands and business models.

Unique Centriq

The second floor of The Oval, in the west wing of the Wanderers Office Park in Johannesburg, has been home to specialist insurers Centriq has called it ‘home’ for just over a year and a half now. In the company’s search for new office space and a place where they can truly flourish, staff and management made a list of priority needs that they felt would make a significant difference to their workday.

Firstly, the company required a large enough space to allow staff to chill-out, but that could also be used a multi-functional room for internal meetings, including a refreshment station and a few other necessary luxuries. The Chameleon, aka Centriq’s recreational area, sports a grass green astroturf-style lawn and a massive cyan blue decal wall.

This area caters for staff for a bit of downtime during office hours and thereafter, a space to have lunch, try one’s hand at a game of table tennis or challenge each other to an intense game of Giant Jenga. In addition, the area caters for a variety of internal and external functions with a projector, two flat-screen televisions as well as an open plan bar for those ‘let-your-hair-down’ end-of-the-month drinks with colleagues.

Gareth Beaver, CEO of Centriq, explains that with the company’s need to have more space for internal meetings, brainstorming sessions, and a place to work quietly without interruptions, “five internal quite areas were decked out in very quirky yet corporate décor”.

“The refreshment station, or coffee bar as we know it, is one of our top-ups of good energy for the day. Most of our staff tend to congregate from time to time at the coffee bar, nattering about the day’s activities and making themselves a good cup of coffee from the array of coffees, teas, milo and hot chocolate available. We love our coffee,” says Beaver. Centriq’s reading room is a quiet and comfortable space to catch up on daily news or business reading. “To help our staff to keep abreast of local and international news, we subscribe to various publications for them to peruse in this space,” adds Beaver.

“We love our home, and the people who make Centriq their home. We consider our staff as family, and it is the best part of our culture” he says. Centriq created a homing map, which is a giant decal of the world, featured in a walkway close to their kitchen facilities.

“Here, our staff, a diverse collective, note on the map where they have travelled to and highlight the most phenomenal experiences they’ve had in those places. This is all part of getting to know one another and discovering parts of our world through each other’s eyes,” says Beaver.

The Inspiration behind it

According to Beaver, the inspiration for Centriq’s offices stems from a dire need to find a larger office space with a fast-growing staff complement. “But there was also a need to celebrate and live our vibrant brand in a tangible way.”

He says that the blank canvas Centriq discovered in the Wanderers Office Park in Johannesburg was brought to life through the imagination and creativity of one very talented member of staff, Liesl Laurens. Being Centriq’s events coordinator for the best part of eight years, Beaver considers Laurens’ extraordinarily talented in visualising, planning and executing large-scale projects such as Centriq’s big office move.

“She has been instrumental in the well-coordinated and cohesive flow of the day-to-day operations of our offices. Her inspiration went beyond, bringing our brand to life through colour,” Beaver explains.

Mirroring productivity

Beaver says that an awesome office space might not be the literal reason staff are more productive, but adds that it definitely creates a positive vibe. “Each person’s disposition will subconsciously mirror the friendly, colourful and peaceful environment of the office. It is well known that happy environments equal productive employees.”

In Centriq’s case, a productive office culture is reflective in the recognition the company received as a Silver Achiever in the 2015 Deloitte Best Company to Work For Survey. “The award recognises the positive sentiment of our employees, rewarding their commitment to making Centriq a great place to work for,” he says.
According to Beaver, the more effort companies make in creating an energy-filled environment, the more staff know and feel they are appreciated and that the company does indeed care about their happiness.

Beaver says he’s noticed a big increase in employee morale and improved working environment as a result of Centriq’s office space. “For example, in having The Chameleon for some much-needed downtime, our staff now take proper lunch breaks, resulting in the afternoons being more productive,” explains Beaver.

“There’s a contagious positive energy and atmosphere that flows about the office at Centriq. Although we’re an extremely busy group of employees, with many of us working long hours, there’s still time for camaraderie, fun and letting our hair down,” Beaver concludes.

A rosy future for specialist UMAs

Specialist underwriting managers have become an important component of the South African insurance landscape. They differ from the UMAs who provide conventional commercial and personal lines cover in that they offer a wide range of expertise on a variety of covers previously not catered for in the general insurance market

Short term insurers are under pressure to grow their market share and at the same time deliver profitable results to their shareholders – the specialist UMA provides a vehicle for them to achieve this with minimal addition to their overall operational costs.

It also allows them to offer a wider range of products, safe in the knowledge that these are underwritten by specialists who know and understand their market and who are motivated to provide them with the profitable growth they are looking for

Brokers a key component

The relationships that UMAs have with their brokers are critical to the success of their operations in view of the fact that UMAs may not deal direct. In order to achieve this, the UMA needs to provide their broker with advice and training on their products and service that is better than anything else they have ever experienced.

This not only motivates the broker to sell their product, but provides them with additional expertise they can use whilst competing for new business as well as a welcome additional source of income.

A quick look at KEU’s product focus provides valuable insights into the specialist UMA space. KEU underwrites covers for the film and entertainment industry and also offers prize indemnity insurance.

Huge potential in the film industry

Film insurance has great potential on the back of SA’s growing film industry. The country not only offers great weather and beautiful scenery, but the current rand to dollar exchange rate makes it very cost effective for overseas production companies to film here.

We are fortunate to have a number of competent South African production companies to assist these firms with the professional staff and specialist equipment that is required. Our Cape Town film studio is world class and we also have a film studio in Johannesburg, as well as a soon to be completed studio being built by our own Anand Singh in Durban.

Event liability and cancellation insurance

Following the passing of the Safety at Sports and Recreational Events Act in 2010 it has become compulsory to have liability cover for all sports and recreational events. This cover is often only required for the period of the event and also requires specific extended liability cover.

KEU’s event liability policy has been created to meet these requirements. Event cancellation insurance is also available to provide protection against cancellations due non-appearance of the artist, guest speaker etc. or due to adverse weather.

Prize indemnity insurance

This product provides cover for the cost of prizes that can be won through a sporting achievement, a display of dexterity or sheer good luck. Cover can be provided under this ‘line’ for hole in one competitions, incentive bonuses for breaking athletic records, performance bonuses for winning championships or fishing competitions for tagged or weighed fish among others. Actuarial assistance is often required in calculating the chance of the prize being won so that an appropriate rate can be charged for this cover

Future UMA considerations

There is no doubt that the UMA is here to stay and that there will be continued growth in this market as there will always be something new or different for which insurance cover will be required. Covers for cyber-crime and other cyber-related risks are a prime example of this.

Centriq Insurance Company Limited and Centriq Life Insurance Company Limited are authorised financial services providers and licensed insurers conducting non-life and life insurance business.
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