South Africa is looking for more Black insurance brokers

Beauty at a meeting

By Risk SA

The insurance industry needs to increase the number of black brokers if it wants to reach a growing black middle class, the Black Economic Empowerment (BEE) Institute said on Wednesday.

Leila Moonda, CEO of the BEE Institute, noted that the number of non-white South Africans earning above R50 000 a year almost tripled between 2004 and 2008, from 305 000 to 901 000. “These are your future customers,” said Moonda. “Do you have people in your organisations who can service them?”

She was speaking at the Financial Intermediaries Association of Southern Africa (FIA) Regional Conference in Johannesburg on Wednesday. The FIA is currently on a nationwide roadshow.

According to the results of a survey released by the University of Cape Town’s (UCT) Unilever Institute this year, South Africa’s black middle class is now bigger than the white middle class. Of the 8.3 million adults classified middle class in 2012, 51 per cent were black, 34 per cent were white, nine per cent coloured and six per cent Indian. In eight years, the black middle class has grown from 1.6 million to 4.2 million adults.

As the black middle class grows, the Financial Sector Code (FSC) is aimed at promoting a transformed and globally competitive financial sector. It was gazetted in November 2012 and launched in July 2013.

Companies generating more than R5 million per annum will be measured against a range of targets in terms of the FSC, such as skills development, employment equity and preferential procurement.

On access to financial services, which is one of the requirements of the scorecard for larger insurers, Moonda believes that insurers will have to develop affordable products and tweak their distribution models to reach previously neglected segments of the market.

“Insurers will find it almost impossible to achieve their financial access targets without on-going assistance from risk and financial advisers,” said Justus van Pletzen, CEO of the FIA. “If they want to make greater inroads into the low income market, they will have to focus more of their attention on broker-led distribution than ever before.”

He added that risk and finance advisers and the advice they dispense, were a common sense solution to the FSC objectives of access and consumer education.

“The challenge for brokers is whether they will be able to distribute products within the affordability criteria that insurers will have to implement,” added Moonda. “If they can rise to this challenge then there is little doubt that they will be at the forefront of transferring knowledge and skills to consumers.”

Executive head of specialist business at Santam, Quinten Matthew, said that while brokers remain an attractive growth channel for insurers, the online channel is growing faster than other channels and direct insurers are more tech savvy.

“Intermediated insurers need to integrate online and offline channels, increasing the number of available interaction points with clients, introducing mobile servicing capability and using social media to understand client concerns,” said Matthew.

Moonda emphasised that brokers would be involved in discussions when the FSC is reviewed in 2014, while Van Pletzen revealed the possible formation of a financial services forum, which would see banks and insurers collaborating to engage the regulators on matters impacting the sector.

The FIA is participating in the short term insurance sector’s Human Capital Development project, which is a joint initiative between industry bodies that is geared towards identifying and filling gaps in skills in the industry, by for example, increasing the number of black brokers in the industry. “INSETA is currently funding a survey to determine gaps in skills across different sectors,” Van Pletzen said.

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