AGENDA

• INTERNATIONAL CHANNEL TRENDS

• THE SOUTH AFRICAN INSURANCE MARKET

• CHANGING DEMANDS FOR INSURANCE

• IMPACT OF NEW LEGISLATION

• CLIENT EXPERIENCE FEEDBACK

• INTERMEDIATION REDEFINED

• THE RESPONSIBILITY FOR CHANGE

CHANNEL MIX

• Internationally, consumers most commonly

purchase insurance products from insurance

agents.

• However these figures, while large, are declining

as the Internet eats ravenously into the agent’s

market share.

― This trend is strongest in the UK and

Germany. Only in Brazil is the agent holding

his own.

Do you currently have at least one insurance product purchased through

one of the following channels? (International Accenture survey, 2010)

CHANNEL GROWTH

The Internet is growing faster than any other distribution channel.

How do you expect to purchase or renew insurance in the next 12 months? (International Accenture survey, 2010)

HOW CLIENTS SEARCH

Source: IBM Powerful interaction points saying goodbye to channel

Mirroring other industries, insurance clients have become truly “multimodal”.

Five predominant channels for information gathering

20% say they use more than 4 interaction points to search for insurance

Mining unrest and industrial actions

Sluggish economic growth

The weakness of the Rand

Not recovering expenses

Currently in a soft cycle, premium level too low

High level of claims in 2012

THE CURRENT CONDITIONS OF OUR MARKET

INTERMEDIATION DECLINING

• Over a five-year period the intermediated

channel has lost 5.7% of its top 10 share

and is the only channel not growing its

share (still has the highest share at 71.3%).

• The Cell Captive insurers have increased

their share the most (2.9%), followed by the

Direct insurer (2.5%) and then

Bancassurance (0.5%).

Composition of top 10 insurers

BLACK MIDDLE CLASS NOW BIGGER THAN WHITE MIDDLE CLASS

Source: UCT Unilever Institute 2013

SLUGGISH GDP GROWTH

• GDP growth expected to average 2.5-

2.75% in 2013.

• CPI is expected to increase to around

5.5% by July, averaging 5.9% in 2013

and ending the year at 5.4%.

• Provincial GDP growth strongest in

Gauteng and Western Cape.

• Provincial GDP growth weakest in

Northern Cape and Limpopo.

GROWING AND DECLINING INDUSTRIES

Top fivesectors

Food and drink (9.2%)

Retail (9.2%)

Commercial Banking (9.4%)

Oil and Gases (9.5%)

Tourism (11.5%)

Bottom five sectors

Consumer Electronics

Telecom: Cell phone

users

Freight transport, rail

Mining Telecom: Main phone line users

SOUTH AFRICA: 3.4% GDP GROWTH (2013-2017 CAGR)

Grey = High growth

Yellow = Moderate growth

Blue = Low growth when compared to

the five year compound average growth

rate of GDP

SPEND BY GOVERNMENT AND INDUSTRIES TO BENEFIT

NEW GROWTH PATH• Massive investment in infrastructure as critical driver of jobs. • R4 trillion investment completed.• The framework identifies investments in five key areas namely:

• Energy

• Transport

• Communication

• Water and housing

• Sustaining high levels of public investment in these areas will create jobs in construction, operation and

maintenance of infrastructure.

• Trigger to build a local supplier industry for the manufacture of the components for the build-programme.• Specific measures, particularly changes to procurement policy and regulations, are identified to ensure that

this is achieved.

• Risks include the still fragile global recovery; competition and collaboration with the new fast-growing

economies; as well as competing interests domestically.

CHANGING RISKS

• Variability in claim numbers, but 2012 significantly worse than average

• Correlation with economic conditions – maintenance expenditure and risk management under pressure

• Also impact by CAT events in Gauteng, Mpumalanga and St Francis Bay

- SantamLARGE LOSSES- SANTAM

2011 2012 Average last 5 years

> R 5m 8 27 10.2

> R 10m 2 7 3.2

> R 30m 1 2 1.25

How to draw a sketch on a insurance claim

BINDER REGULATIONS

• Information letter published on 1 July 2013.

― Binder activities clarified.

― Incidental activities deemed part of binder functions.

― Fees to be allocated per standard tick list of activities.

― Separate outsourced and binder agreements may not be concluded for the same binder function.

• Insurers required to report to the Regulator all binder fees currently paid per identified activity per binder

holder.

• Regulator to propose fee benchmarks per activity in 2014.

• “Mechanical entering into” may be remunerated by an “insignificant binder fee” only.

• “Intermediary fee” paid to policyholder not impacted, may still charge for risk management and advice.

• 90 days to re-contract and comply if existing agreements non compliant – due date 30 September 2013.

TREATING CUSTOMERS FAIRLY

Fair treatment of customer is

central to the firm culture.

Products and services are

designed and targeted to appropriate

customer groups.

Customers are given clear information

before, during and after the

time of contracting.

Advice is suitable and takes account of the customer’s circumstances.

Products perform as

firms have led them to expect.

Customers do not face unreasonable post-sale barriers to change product,

switch provider, submit a claim or

make a complaint.

• Outcomes based approach requires subjectivity, no rules are defined.• Important to define “Fair” in the context of your business.• Regulator assessment will ascribe double the weighting to outcome 1 than any other outcome.• Applies to financial services providers, including intermediaries.• Effective date is 1 January 2014.

OSTI REPORT

Formal complaints received Types of complaints

• Even though 2012 was a particularly difficult year for insurers as a consequence of adverse weather conditions and fires, the pattern of claims remained unchanged.

• Motor is still the largest complaints category.

OSTI REPORT

* Auto and General excluded since Budget and First for Women still included for 2012

Claims percentage per category higher for banks and direct writers

SANTAM COMPLAINTS

SERVICE FAILURES

HELLO PETER COMPLAINTS (JUNE 2013)

Panelshop repair failure is core concern.

Policy interpretation failures:

•Intermediary blamed for not informing the client of what is covered and not covered.

•Clients unaware of contents of their policy documents. Repudiations of insufficient security measures and not specifying items like a pair of earrings and GPS resulting in frustration and anger from clients.

Average sum insured of the motor book increased

Registered investment advisors

Independent intermediariesIndependent agents

Call centresDirect / Internet

Individuals

NEW THINKING CHALLENGES CONVENTIONAL ASSUMPTIONS

Mix and match (‘PULL’)driven by customers

Traditional approach (‘PUSH’)driven by insurers and intermediaries

MICRO AND SMALL MEDIUM LARGE

DirectAggregators

BanksPoint-Of-Sale

IntermediariesDirect

AggregatorsAdvisors

IntermediariesAdvisors

Businesses

BanksWorksite marketing

NEED FOR SOPHISTICATED AND INTEGRATED RISK MANAGEMENT SOLUTIONS

According to the 2011 Accenture Global Risk Management study, 98% of respondents said risk management is a higher priority today than it was two years ago. More than 80% of companies surveyed also consider their risk area to be a key management function that helps them deal with marketplace volatility and organisational complexity.

Source: The changing face of risk management, Accenture, 2011

THREATS TO INTERMEDIATION

ABILITY TO CAPITALISE ON GROWTH OF BLACK MIDDLE CLASS.

AGENTS HOLD THE DOMINANT MARKET SHARE INTERNATIONALLY• Fee pressure and intermediary

market consolidation make this an attractive growth channel for local insurers.

• Reduces income volatility and improves insurer control.

ONLINE GROWING FASTER THAN ANY OTHER CHANNEL• Less reliance on traditional word of

mouth.• Availability of capital for investment in

technology.• Direct players are more tech savvy.

BANCASSURANCE offers clients unique value propositions biased to direct interaction.

AFFINITY MARKETS offer clients “brand” promises that increasingly influence client buying decisions.

OPPORTUNITIES FOR INTERMEDIATION

ACCESS IS MORE IMPORTANT THAN CHANNEL

• Search using multiple technologies.

• Purchase personal interaction.

CLIENT RETENTION OFFERS GREATEST VALUE

• Trust and after sales service are differentiators.

• Important to be able to move seamlessly across

interaction mechanisms.

NEED FOR TECHNICAL EXCELLENCE

• Value of advice is important.

EMERGING VALUE PROPOSITION

CLIENT SEGMENTATION

• Actively manage risk selection and retention efforts.

• Analyse the cost to service client segments to understand how service

expectations and profitability differ.

CLIENT VALUE PROPOSITION

• Improve interaction quality.

• Understand how to personalise service and show clients they are

valued.

• Offer a superior client experience dependent on their personal needs.

• Make sales and renewal simple and convenient.

• Drive speed of resolution of queries.

• Tailor and improve quality of advice.

• Develop technical and risk management expertise.

EMERGING VALUE PROPOSITION

TECHNOLOGY INTERFACE

• Increase the number of available interaction points with clients.

• Integrate online and offline channels seamlessly.

• Introduce mobile research and servicing capability.

• Use social media to understand client concerns and respond to complaints.

MAKE THINGS HAPPEN

• Intermediaries led change and innovation 15 years ago.

• Who is leading change and innovation now?

• Let’s get our own back.

• Santam would like to be your partner of choice on

the journey.

• We are in it together.