(For Immediate release)
24 July 2017
Deputy Finance Minister pledges Government's support to the Insurance Industry
Deputy finance minister Sfiso Buthelezi has pledged government's support to the South African insurance industry and called on insurers to continue working in the spirit of collaboration and good corporate governance. Speaking at the South African Insurance Association's annual cocktail event, which took place on 20 July 2017 in Sandton, the deputy minister stressed that while the industry was on the right path, there was still a lot of work that needed to be done.
"The short-term insurance sector plays an important role in building a sustainable and inclusive economy," he said. "These are challenging times, thanks to factors such as global economic and political instability, climate change, economic recession and credit rating downgrades. But it is in challenging times that we can unite to find common ground. This is the time when the insurance sector can truly show its added value."
Buthelezi singled out three key focus areas for the industry, namely improving access to insurance, transforming the insurance sector, and partnering with government to address climate change.
"Our aim to ensure that all South Africans have access to insurance and are protected against unforeseen events," he said. "This is especially important for low-income households and small businesses, and those who live in rural areas. Unforeseen emergencies can push vulnerable families and businesses into vicious poverty traps. Access to insurance can cushion the shocks and prevent families and businesses from slipping into these traps.
"We need to ask ourselves, 'Are we doing enough to ensure that low-income households and small businesses have access to the protection they need?’ and ‘Are there appropriate products being developed to meet these needs?'"
The deputy minister called for the industry to come up with innovative solutions to ensure nobody is left out.
"Surely the needs of low-income households go beyond just funeral cover and consumer credit insurance. Micro-insurance and compulsory third-party cover are a step in the right direction, but we need the type of innovative thinking from industry that will solve the most basic problems."
On the issue of transformation, Buthelezi made the point that, more than merely being a political imperative, transformation is essentially a business imperative.
"It's what South Africa needs. It's what business needs," he said.
Sadly, he said, the industry has been slow to transform. Few black executives are represented at senior management and board level, he said. There are few black-owned insurers and brokers, and procurement practices are being skewed in favour of a select few – to mention just a few of the examples he cited.
Buthelezi added that regulation had an important role to play in creating an enabling environment for the growth of black-owned insurers, and that compliance needed to be carefully monitored.
"We are aware that many people in the industry feel marginalised," he said. "And although constructive engagements are under way by SAIA to find solutions to these problems, we must do more and we must keep up this effort. I call on the SAIA board, and all the members of the insurance industry, to place this issue high on your agendas and ensure that action plans are in place to bring in a new generation of leaders.
"It is imperative that we build teams with a diverse range of abilities and skill sets because that ability to challenge the status quo is what makes for a truly innovative business. For me, the business need for diversity inclusion is clear."
Climate change was the final issue that the deputy minister addressed.
"Increases in catastrophic risk events can provide both an opportunity and a threat to insurers," he said. "There is an opportunity for growth in underwriting new products, but the combination of concentrated exposures to large catastrophic losses, inadequate risk management and/or the potential for mis-pricing could undermine the sustainability of the sector.
“Government is determined to stay ahead of the climate curve with the development of climate change products and carbon offsets. In addition, National Treasury is exploring the feasibility of introducing support to the agricultural insurance market. This support is intended to alleviate the pressures on both commercial and smallholder farmers and ensure the sustainability of the agricultural insurance market."
In conclusion, Buthelezi restated government's commitment to the industry, spelling out its expectations in the process:
"We remain committed to seeing an insurance sector that is transformed and supports financial inclusion,” he said. “We would like to see an industry that continues to innovate, and also treats it customers fairly; an industry that continues to be well regulated; an industry that supports key government initiatives on infrastructure; an industry that continues to reduce costs so that customers get value for their money; and an industry that carefully manages conflicts of interest to ensure that the customer and the companies' interests are aligned."
SAIA CEO Viviene Pearson reiterated the industry's commitment to all of the items raised by deputy minister in his address.
"It is encouraging to see that the issues mentioned by the deputy minister are also very high on our agenda," she said. "There is a lot of common ground and we are absolutely committed to continue with our collaborative approach and to enter into partnerships with stakeholders in the industry and in government. There are a lot of things that we are working on together that have the potential to change the future for the good.
"We are fully committed to transformation and recognise the role that a transformed and inclusive society will play in economic growth and in ensuring a sustainable future for our country; a future in which we can all flourish and thrive."
For more information please contact:
General Manager: Stakeholder Relations and Communication
Contact: +27 11 726 5381 or Lelo@saia.co.za