From the Desk of the CEO
On Thursday, 24 February 2021, South Africans waited with bated breath as the Minister of Finance, Mr Tito Mboweni went through the 2020/21 budget speech. While South Africa still faces a real risk of a sovereign debt crisis if it does not arrest the rising trajectory of debt, most people sighed in relief to learn of the National Treasury’s resolve in sticking to its fiscal consolidation path - something Minister Mboweni described as "challenging but achievable" – meaning that SA will run smaller deficits than expected.
The Finance Minister said that the gross government debt is now set to peak at 89% of GDP in 2025/2026, against a previous estimate of 95%, meaning that SA will now need to borrow R361bn less over the next three years than it was expecting. SA’s fiscal position was already unsustainable before the pandemic. The advent of Covid-19 exacerbated the situation by reducing tax revenue, while social spending spiked. Overall, his speech was well-received in the economic and financial markets space, something that was further demonstrated by the rallying of the South African currency to a one-year high.
The Covid-19 pandemic is still affecting economic activity, not only in SA but globally. New infection cases in SA have decreased in the last few weeks prompting the government to further open the economy as well as some land borders to facilitate regional movement and trade. SAIA member companies are continuing to pay Contingency Business Interruption (CBI) insurance claims following legal certainty obtained through various court judgements both in South Africa and in the United Kingdom.
Many members are also investing heavily in transformation programmes designed to offer greater processing speeds, better quality and quicker claim turn-around times, a sharper focus on the policyholder and to lower costs which, in the long run, could potentially result in sustainably lower insurance premiums subject to each policyholder’s risk profile as well as other risk and cost factors.
Climate change is real, from heavy rains to crippling droughts. Most recent are the heavy rains in the Southern African region. This includes South Africa, Mozambique, Zimbabwe, Lesotho and Eswatini. In addition to the heavy rains, the region has suffered droughts in recent years. SAIA and non-life insurance companies have worked tirelessly to find soluble solutions towards making drought insurance affordable for both commercial and emerging farmers, with the government, towards the sustainability of food security in South Africa. This includes the introduction of a new product offering in South Africa currently being piloted, a product offering that has globally been proven most appropriate for emerging farmers, called index insurance.
SAIA continues to be a pain-point for motor body repairers who continue to demand that it is made public. In my January 2021 Bulletin column, I did state that SAIA had noted these concerns. We have started discussing the relevant issues in the SAIA structures again, as well as initiated discussions with relevant stakeholders in government and other parties before we will be able to communicate the SAIA position – whether reaffirmed or not - in the future.
SAIA Chief Executive
SAIA Education on the Non-Life Insurance Industry Vehicle Salvage Data (VSD) System
The South African Insurance Association (“SAIA”) will take all steps necessary through educative and other information dissemination platforms to ensure that policyholders and general consumers have a good understanding of the purpose of the non-life insurance industry’s Vehicle Salvage Data (VSD) system. The full background, intent, and industry agreement relating to the VSD system are enclosed in the SAIA Code of Conduct, of which the link is enclosed for the reader’s ease of reference.
About the SAIA Code of Motor Salvage
The purpose of the Code of Motor Salvage is to establish a common approach when dealing with motor salvage to assist in combating motor vehicle crime, specifically the cloning of motor vehicles for the benefit of all role players and ultimately the South African public. Also, the Code of Motor Salvage aims to ensure that consumers are treated fairly throughout the processes followed, and the decisions made related to accident damaged and/or stolen recovered vehicles. The Code establishes best practices in salvage management to benefit all participants in this process, but mainly insurers and their policyholders or clients. Insurers benefit by following these processes in many ways, including to insure mainly legitimate or legal motor vehicles. This is not only good for the sustainability, profitability, and cost of motor insurance, but also good for the customer.
In all, the principles entrenched in this Code support the Second Hand Goods Act, 2009, the primary function of which is to regulate the business of dealers in second-hand goods and pawnbrokers to limit the trade in stolen goods and promote ethical standards in the secondhand goods trade.
Why would the SAIA Code of Motor Salvage be relevant to the VSD system?
The VSD system contains information on salvage vehicles, previously insured by the non-life insurance industry. To note, only one-third of vehicles in South Africa are insured, which renders two-thirds of vehicles in South Africa uninsured.
A vehicle is considered salvage by the non-life insurance industry if it is ‘written-off’ following for instance a motor accident. The insurer would have assessed the damaged vehicle including the repair costs. If the motor assessor deems the cost of repairs to be uneconomical to repair, the vehicle would then be declared as a ‘write-off’. This normally happens when the cost of repairs is high in relation to, or more than, the insured value of the vehicle. The vehicles enclosed in the VSD system use NaTIS codes, which distinguishes the different salvage vehicles enclosed in the system. NaTIS stands for the National Traffic Information System. When a written-off vehicle is sold, the respective code is disclosed to the buyer. In this, the non-life insurance industry ensures that the relevant stakeholders who buy the salvage vehicles are fully informed of the relevant code of the vehicle being sold and therefore how the respective vehicle should be treated going forward. For instance, a salvage vehicle Code 3 is a built-up vehicle. Built-up, is when the extent of the damage includes structural
defects that require substantial rebuilding. The vehicle being rebuilt would not conform to the manufacturer’s specification; however, it can be put back to a roadworthy status.
It is highly recommended that the readers familiarise themseles with the SAIA Code of Motor Salvage for further detail on the respective Codes used and the process followed by the nonlife insurance industry.
What harm could there be if the VSD system was to be made public?
The primary reason the VSD system was created was to combat motor vehicle crime. If the database is made public, this will then allow criminal syndicates to have access to the entire non-life insurance industry database of scrapped vehicle VINs. If this were to happen, both the banking industry and the non-life insurance industry could see a dramatic increase in false financing and insurance of cloned vehicles.
SAIA and its members continue to support, financially and otherwise, numerous crime-fighting initiatives around vehicle crime in South Africa, and this is demonstrated by its work with the Insurance Crime Bureau (ICB) and Business Against Crime South Africa (BACSA). The ICB has been involved in numerous successful vehicle crime-fighting initiatives in collaboration with the South African Police Service (SAPS) aimed at significantly reducing the number of cloned vehicles on our roads for years.
These are important initiatives that benefit both the sustainability of the insurance industry, as well as sustainable and more affordable premiums for policyholders.
We have also noted the recent media articles around the VSD. The concerns raised by motor body repairers and various other stakeholders are valid but releasing scrapped vehicle VIN numbers is not the silver bullet to alleviate the challenges consumers face in the accident damaged vehicle buying and selling space as the VSD only contains 33% of the data while the remaining 67% of vehicles remain uninsured on our national roads, SAIA’s philosophy has always been that of collaboration and cooperation, and as such, the concerns and issues raised will continue to be discussed and considered within SAIA structures, as well as with other relevant stakeholders, in the coming months.
This article was written by Susan Walls, SAIA Insurance Technical Advisor. For more information, please contact: Susan@saia.co.za
Guidelines for Competition in South Africa’s Automotive Aftermarkets
In December 2020, the Competition Commission (CompCom) issued Guidelines for Competition in the South African Automotive Aftermarkets (the Guidelines), after extensive onsultation with various stakeholders.
The Guidelines apply to the Automotive Aftermarket products and services with the intention of entrenching the following principles:
- promotion of competition in the Automotive Aftermarket,
- increase transparency and facilitate consumer choice on products and services offered,
- promote economic access, inclusion, and greater spread of ownership for historically disadvantaged individuals (HDIs).
The Automotive Aftermarkets refers to the after-sale market which includes amongst others, the maintenance and repair services, and related value-added products, mechanical, structural, and non-structural repairs to motor vehicles, the sale of motor vehicle spare parts, tools, and components as well as the sale and administration of motor vehicle insurance. Further, the largest portion of the aftermarket is the vehicle servicing, repairs, and parts supply channels, which form approximately 80% of the entire Automotive Aftermarket industry, both
in employment and rand value contributions to the economy.
These Guidelines are important for the non-life insurance industry, especially as motor
insurance accounts for about 45% of the non-life insurance business. Some of the proactive measures introduced in relation to in-warranty service, maintenance, and repairs include the following:
- a consumer’s choice to seek service, maintenance, and mechanical repair work for their motor vehicles at a service provider of their choice should not be obstructed, regardless of whether that service provider is a dealer approved by the original equipment manufacturer (OEM) or an independent service provider (ISP).
- during the in-warranty period, the motor body repairs of consumers with insurance shall be undertaken by approved motor body repairers allocated by the insurer.
- independent service providers must disclose to consumers the risk of damage that could arise from their work, including consequential damage to the motor vehicle, which may potentially void certain obligations of the OEM in terms of the warranty.
The Guidelines also provide measures that address the appointment of service providers and allocation of work by insurers. The measures include the following:
- Insurers must adopt measures to promote the fair allocation of work to repairers on their panels, with a preference for firms owned by HDIs.
- To ensure that the panel appointment process is fair, Insurers shall publish the standards used to accredit repairers on their websites and/or other suitable media. The CompCom has found that most consumers are sometimes unaware that the purchase price of the motor vehicle is bundled with the price of value-added products (VAPs). To give consumers greater choice, the Guidelines provide that maintenance and service plans must be unbundled at the point of sale. This will also allow for more players to provide such VAPs for consumers whose motor vehicles are in-warranty.
The CompCom intends to conduct periodic impact assessments to monitor compliance of adherence to the Guidelines and shall require affected stakeholders to submit information and data in response to information requests issued by the CompCom in the course of monitoring compliance.
The South African Insurance Association (SAIA) would like to take this opportunity to affirm its support for the Guidelines and also thank the Competition Commission for its diligence and widely consultative approach in the development of the Guidelines. Our members are still unpacking it to see how they can align their processes with the Guidelines provisions.
This article was written by Mashudu Mabogo, SAIA Legal Specialist. For more information, please contact: Mashudu@saia.co.za
4 Industry News
Exercise vigilance when Buying a Used Vehicle
After a house, a car is probably the most important purchase made by most consumers. As this process is a very daunting experience, it is important to take the time to do the necessary checks before completing these transactions. This will save the buyer, and in many cases the seller as well, much inconvenience and a lot of money.
Consumers in the market for a used car should be on high alert for unscrupulous sellers and buyers who are ready to pounce on their hard-earned cash and take them for a ride. It is a reality that thousands of cars on South African roads have either been hijacked or stolen or are illegally imported vehicles. It is often these vehicles that are used to defraud innocent buyers.
More than 1.5 million stolen and hijacked motor vehicles have never been recovered. These vehicles have either been exported, chopped for parts, or sold to innocent buyers. Many, however, have been cloned and are in South Africa, being used on our public roads by mostly unaware, innocent owners.
It is estimated that more than 20 000 unrecovered motor vehicles, valued at more than R4 billion, are illegally entering the South African motor vehicle market annually and are filtered back into the hands of consumers, mostly as cloned vehicles.
Furthermore, it is also becoming more apparent that Southern Africa is being used as the dumping area for illegal imported and imported stolen motor vehicles from all over the world. The illegally imported and stolen vehicles are not necessarily old and unsafe vehicles, in fact, in many instances, these are expensive and luxurious vehicles that are offered at a good price to the South African public.
All illegally imported vehicles are seized by the South African Revenue Service (SARS), International Trade Administration Commission (ITAC) or by the South African Police Service (SAPS) when they are identified. These seized illegally imported vehicles are mostly destroyed (compacted) by Government. Stolen vehicles are confiscated by the SAPS and returned to their rightful owners.
Throughout the lifespan of these illegal vehicles, motor dealers will buy and sell them; banks will finance them; insurance companies will insure them, and the public will unknowingly buy them. There is a good chance that the second-hand vehicle, that a consumer considers buying, could be a stolen, hijacked or illegally imported vehicle that re-entered the market as a cloned vehicle.
If you do end up buying one of these illegal vehicles, this will result in you losing both the vehicle and the money used to purchase it when recovered by the police. To prevent the cloning of and the use of parts from stolen motor vehicles, microdotting of motor vehicles was recommended and the implementation supported by BACSA as early as 2003.
Microdots are disc-shaped particles, typically 1mm or less in diameter, containing a unique identification number. In the case of motor vehicles, thousands (minimum of 10 000 for most vehicle types) of these microdots are sprayed on a number of overt and covert places. It is proven that it is close to impossible for criminals to remove all the microdots. The microdots effectively provides the vehicle with its own DNA. There is a once-off cost to fit microdots andno monthly payments.
The fitment of microdots to new vehicles and vehicles presented for police clearance became compulsory from 1 September 2012. Every fitment is recorded on the National Traffic Information System (NaTIS). By the end of January 2019, NaTIS statistics showed that 5.06 million vehicles registered in South Africa had microdots fitted. This represents more than 40% of the total live motor vehicle population of South Africa at the time and 100% of all vehicles manufactured and/or imported after 1 September 2012.
The use of microdots to identify vehicles has become a standard practice within the SAPS and forms an integral part of vehicle identification and the investigation process. Microdots are central to the process of identifying cloned vehicles. It is however rarely used by motor vehicle dealers and other businesses to identify possible cloned vehicles.
It is incomprehensible that microdots are not used by everyone as a standard to mark assets and later identify possible stolen motor vehicles and other valuable items.
BACSA, with the help of the accredited members of the Microdot Association of Southern Africa, DataDot Technology, Veridot and Recoveri Tag what’s Yours, are currently training more than 2 000 SAPS Designated Second-Hand Goods Officers to enforce the legal requirements of the Second-Hand Goods Act, 2009. More than 16 000 SAPS members, mostly detectives, have already been trained to use the technology.
When buying a used motor vehicle, the following is recommended:
- Never buy a vehicle without a NaTIS registration certificate. If the vehicle is financed, the registration certificate will be held by the bank and it will only be released if the vehicle is paid in full.
- Check that the information on the registration certificate and/or license disc match the information on the vehicle in all aspects. Check that all the VIN/chassis numbers on the vehicle match each other and the certificates and that it has not been tampered with.
- Check for spelling mistakes on the registration certificate and that it is not a photocopy.
- Never buy a vehicle advertised or displayed with foreign number plates.
- Never buy a vehicle that is registered in a foreign country – even our neighbouring countries. The probability of you being allowed to import the vehicle is very low. It is lso illegal to ordinarily operate a foreign registered vehicle in South Africa.
- Illegally imported vehicles can visually be identified by, for example, models that are clearly not sold in South Africa, mirrors on the front fender of the vehicle, mirrors in the back window, labels in the side windows in foreign languages and wipers on the front headlights.
- It is strongly recommended that used vehicles be bought from reputable dealers. Although this is not a guarantee, chances are better that the vehicle you are buying from a reputable dealer is legal. It is important for dealers to protect themselves, not only from losses but to a greater extent from a tarnished reputation. These dealers normally check that the vehicles being sold are legal and have the knowledge to identify imported vehicles. It is also easier to hold them liable if it is found that the vehicle was illegally imported or stolen.
- In the same vein, it is strongly recommended that used motor vehicle dealers, auctioneers of used vehicles and even salvage dealers, do not purchase any motor vehicles that was registered in South Africa after 1 September 2012 without first verifying the microdots physically on the vehicle. The Second-Hand Goods Act, 2009 (Act No. 6 of 2009) makes it a requirement that second-hand motor vehicle dealers must record motor vehicle details in the prescribed register, including the microdot number read from the microdot on the vehicle. This makes the microdot information readily available to be verified.
- It is strongly recommended that buyers of used motor vehicles should insist; from the dealer/seller; on a microdot fitment confirmation certificate issued for the vehicle by a reputable accredited microdot fitment centre. For information on accredited microdot fitment centres near you, please contact Microdot Association of Southern Africa, DataDot Technology (www.datadot.co.za), Veridot (www.veridot.co.za) and Recoveri Tag what’s Yours (https://recoveri-tag-whats-yours.business.site/).
- It is recommended that financial institutions (banks) do not finance and that insurance companies do not insure vehicles of which the microdot fitment and its originality has not been verified.
- The golden rule is, if the deal looks too good to be true, walk away, because it probably is. Use your head, not your heart.
For more information on microdots, please contact the Microdot Association of Southern Africa (www.microdotassociation.co.za).
This article was written by Fouché Burgers, Programme Executive, Business Against Crime South Africa (BACSA).
Protection of Personal Information Act, 2013 (ACT NO. 4 OF 2013)
The Information Regulator has advised that the Guideline to Develop Codes of Conduct in terms of Section 65 of the Protection of Personal Information Act, 2013 (No.4 of 2013) will be published in two official languages in the Government Gazette, effective 1 March 2021. The Regulator stated that the Guideline to Develop Codes of Conduct that will be published in the Government Gazette is also available on its website to enable relevant bodies to begin developing their Codes.
The Regulator advised that the Codes will only be received by the Regulator for consideration after the publication in the Government Gazette, after which a notice will appear in the Government Gazette proclaiming the commencement of the Regulations issued in terms of Section 112(2) of the Protection of Personal Information Act, 2013 (Act No. 4 of 2013) as follows:
- Regulation 4 will be effective on 1 May 2021;
- Regulation 5 will be effective on 1 March 2021 and
- the residual Regulations will be effective on 1 July 2021.
This article was written by Adv. P. Tlakula, Chairperson. By order of the Chairperson of the Information Regulator. General enquiries email: firstname.lastname@example.org Tel: 010 023 5200
The INSETA and Wits University First Two Volumes in the Body of Knowledge Series is now available
INSETA recognises the importance of research and has embarked on a number of partnerships with universities including Wits, UCT and DUT to give substance to INSETA’s research goals. It is appropriate to point out other institutions have come to a similar realisation concerning the importance of research. Lloyd’s for example has launched a number of research initiatives. This article discusses the research initiative, the Body of Knowledge Project, which INSETA has partnered with Wits University to achieve. INSETA as a Seta was established by legislation to develop the skills of South Africa’s workforce. In this case specifically skills needed in the insurance sector. What is clear is the insurance sector is a multifaceted and highly technical sector. The sector needs a wide range of high-level technical skills. Many of the positions which exist in the sector may well be regarded as being filled by professional persons. These can be regarded as occupational professions, professions practiced within the sector and not necessarily easily recognizable as the usual and well-known professions such as doctors, attorneys, engineers, actuaries, accountants and so on. The fact that these occupational professions do in fact exist means there is a need for a mechanism for persons to acquire the necessary skills. This is a unique problem that the body of knowledge project is designed to address.
The point of departure to arrive at a solution is to look at the general characteristics of any of the well-known professions. Once this is done then the way forward with occupational professions becomes clearer. Take any profession and ask what is required for a person to become a professional in that field. Take a medical doctor for example. What must a person do to become a professional doctor – say a General Practitioner (GP). If some thought is given to the matter is becomes clear the person who wants to be a professional doctor would have to do four things:
- Firstly, that person would have to study the specific body of knowledge appropriate to that profession, pass examinations and be certified as competent in the knowledge. In the normal profession, this nowadays is almost always achieved at a university. The aspirant professional starts by going to a university. And, this is the big difference with our occupational professions. The body of knowledge is not taught at universities.
- Second, that person would need to have adequate relevant practical experience in the field.
- Thirdly that person should be a member of a professional association.
- Finally, that person should be fit and proper.
So, the starting point is the existence of an appropriate specific body of knowledge. Now the interesting thing about any specific body of knowledge is that it is fairly standard around the world, taking local circumstances into consideration. It is also interesting that this high degree of standardisation exists without specific co-ordination. So, doctors learn what doctors learn, engineers learn what engineers learn, lawyers learn what lawyers learn, and so on. Because of this high degree of worldwide standardisation, it is clear that the specific bodies of knowledge do not belong to anyone. These bodies of knowledge can be described as public goods. That does not stop individuals and individual institutions from preparing their own material but in the end, it should cover the same ground.
This would suggest that the point of departure is to create a body of knowledge that is a public good. This is what the body of knowledge project sets out to achieve. It should be clear that to have a body of knowledge is not the end of the project but the beginning of the project. Last year, 2020, two “books” were prepared and are now available. These “books” are used at Wits as part of the second-year course and thus if also used by the sector will facilitate articulation between the university and the sector.
To achieve the goal of being a public good it, it is necessary to incorporate the input from a wide range of sources. Therefore, INSETA in consultation with SAIA established an industry committee of volunteers to work on the books. Clearly, not everyone on the committee would have the time to read some 400 pages of technical content and comment on these. The idea is to identify issues that are of importance to the sector and at least once a year hold a research conference where papers on these subjects can be presented and considered. The work from the research conferences can be collected and where appropriate feed into the body of knowledge and eventually into a worldwide network of insurance research.
This then also suggests there are two approaches to achieving the outcome of occupational professionalism – the bottom-up and the top-down approach. The underwriter discussed above would be an example of the bottom-up approach. Each function within the sector can be identified, as for example the underwriter. Once this is done then the knowledge needed for that function can be identified and provided. This would suggest the outcome would be a matrix. The one side would list all the functions and the other what knowledge is needed. A bit of thought would indicate a great deal of commonality would exist. If one takes say fire, motor, marine, liability underwriters it is likely that many commonalities will exist between these underwriters. A completely different body of knowledge is not required for each and every type of underwriter.
It should be clear the Body of Knowledge project is the beginning, and a considerable amount of work is necessary, going forward, to bring the project to fruition. The co-operation of various stakeholders will be necessary to efficiently bring the matter to a satisfactory conclusion. Following the official launch of the first two volumes in the Body of Insurance Knowledge Series. The INSETA and Wits University are pleased to say that the soft copies of the two volumes can now be downloaded for free by the public.
For more information or to download the Body of Knowledge series, kindly visit the following websites:
Research - Wits University https://www.wits.ac.za/sbs/research/ and updates will periodically be issued as content changes.