FIA regional conference 2012

Johannesburg Country Club, Auckland Park

Bryan van Flymen, President of the FIA, extended a warm welcome to the delegates at the FIA Regional Conference held on 26 July. Bryan also expressed his thanks to the sponsors whose support made this roadshow possible: Genasys Technologies, Sanlam, Mutual & Federal, Sasria and Tracker.

In his address, Bryan highlighted challenges facing the intermediary currently, and going forward.

Legislation is here to stay – the insurance industry has been lumped together with banks, which have been censured for their irresponsible behaviour, and “we face the same stringent regulatory requirements”.

Direct insurers spend nearly billion rand advertising products annually, but the term direct itself can be a red herring – anyone who can issue a policy can be seen as direct. Intermediaries, in contrast, bring professionalism and intermediaries are there for the duration of the contract; you need just consider claims time to take the measure of the difference between the two approaches. “You can’t shake hands with a call centre” seems to encapsulate this sentiment. Traditional insurers are paying 25% more on claims than the direct ones.

Another aspect of the direct challenge is the downplaying of the role of the intermediary – the public does not trust financial products, and this is not the fault of the insurance industry, but can be laid at the feet of the banking and investment sectors. “As a consequence, we have to strive for the recognition of value of the role of the intermediary,” said Bryan.

A further trend is the commoditisation of insurance products – financial suppliers see this as an easy market to get into.

What are the solutions?

Intermediaries must behave professionally, and this is achieved by their giving their very best efforts to clients. The cornerstone of survival is professionalism – acting in a manner in which they gain the trust of their clients, and building quality relationships with them. Bryan said, “We have much of which we can be proud; during the financial crisis, no insurers stopped paying claims.”

According to Bryan, “The FIA Code of Conduct is evidence of our efforts to show our members how to act professionally, following due process. We have to take pride in what we do, and, despite the bad publicity, we are entitled to the fees we earn; in fact, in many cases, we should be earning more, as we deserve it. We need to be unashamed of who we are.”

“We must support our product providers. We have a number of traditional insurers who support us, and we must support them, ensuring the survival of both. We are not partners, but we need to be transparent and honest. We should be fighting alternative distribution of products, for example, insurance available via the local shopping outlet.”

What will be the outcome of this approach?

Intermediaries will survive.

Anton Swanepoel, dubbed by Justus van Pletzen as the Father of the FIA Code of Conduct, spent some time helping the audience unpack this document. He allayed any potential fears the intermediary may be experiencing regarding the Code, asserting that it is merely a formalized version of what they are already doing. The aim of the Code is to set a professional standard of client interaction in the financial services industry. This Code combines the values and processes that will guide FSPs and their representatives.

Anton reminded the audience that it takes decades to build a business, and referred to Bob Fussell, industry stalwart, as an example of this. But, how many clients does it take to ruin the financial success of a business, and, more importantly, a reputation? Do intermediaries not face more risk than they ever have? Should they not consider a way of interacting with their clients, and, at the same time, protecting themselves? How do they grow their businesses? How are they going to interact with their clients going forward to protect what they already have and to grow? “ This is what the Code of Conduct aims to do, and we are proud to have introduced it. It is a step-by-step process that you can follow with your client,” says Anton.

The FIA Code of Conduct: Setting minimum standards

1. Professional introduction – create professional first impression. Chat, and this will give you invaluable information in selecting the correct product for your client.

2. Gather client information.

3. Agree on the service to be rendered – in the past, it used to be a verbal agreement.

4. Conduct an analysis and prepare the proposal.

5. Present the proposal – if client does not accept it, there is no liability under the FAIS Act.

6. Agree on the product solution – then the contract comes into existence.

7. Implement the proposal.

8. Render ongoing advisory and intermediary services.

“Regulation has forced us to have an ongoing intermediary service available to our clients. This is a great thing, as it requires us to see our clients at least once a year, and this helps us keep existing customer satisfied. The FIA Code of Conduct is just a formalization of what you say you apply when you see clients.”

Despite hard work and integrity, clients can still complain. One complaint can destroy 30 years of hard work. If the intermediary understands that building a business is difficult, then protecting their reputation is even more so – “ the Code of Conduct is designed to protect you by providing a process.”

Anton asked the audience to place themselves in the role of the client, and posed the following questions to them in that capacity: Do you value what your broker is doing? Would you value a trusting relationship? Would you value honesty and fairness in every interaction? With efficiency and within good time? Value for money? Does consistent professionalism give added confidence?

This is your requirement of me. If I act in accordance with the CC, would I deliver all of the aforementioned? The building blocks to instilling trust, according to the Code of Conduct are:

honesty, fairness, skill, care, diligence, all in the interest of the client, enhancing the integrity of the industry, human resources, operational ability, profitability.

In support of his assertions, Anton quoted Stephen Covey: “When the trust account is high, communication is easy, instant, and effective.”

He also cited the example of Warren Buffet buying a subsidiary of Walmart in a $23billion deal. One meeting of two hours concluded the deal, and Buffet publically declared that there was no due diligence investigation into Walmart’s business prior to the deal. Why? Trust.

Having explored the rationale behind the Code of Conduct, Anton examined some of the detail contained within it, thereby abiding the minimum standards.

Caroline da Silva addressed some of the driving forces in the industry. She tackled the growth of the direct market, a wake-up call for traditional insurers, and urged the industry to take on the challenge of exposing misrepresentation in the media. Having maligned the broker, direct advertising has moved on to making price the focus of the battle. The result has been for consumers to regard insurance as a grudge purchase, and to the commoditization of products. This impacts both the consumers view of the value intermediaries provide, and the industry’s ability to attract and retain new talent.

Caroline commented that the abundance of regulation, increasingly complex, simply resulted in consumers having more choice, thereby increasing the opportunity for him or her to make the wrong choice. This means we need intermediaries more than ever. She traced the evolution of the regulations, the one growing out of the consequence of the other.

What is the impact of this heightened consumerism?

There is a dissonance, Caroline claimed, between what the consumer perceives regarding our industry, and what we perceive and we have to work at closing that gap. We understand the value of insurance, that we are the lubricant of the economy; we have a noble purpose, and we should be proud. If we find the disconnect, we can work at making a difference.

How should we respond to these trends?

We must actively promote the role of advice ( the FIA has started to this). M&F has made a commitment that all above-the-line marketing will promote the value of the role of the broker. A lot of intermediated insurers will, no doubt, follow this path. We pay commission to intermediaries, so if brokers spread the word, we win. We must create a capability for the client, who often does not know how to find a broker, to sms us so we can help them find a broker in their area.

We should work together to uphold the image of our industry through associations like FIA, SAIA, IISA.

Further updates were presented by Charene Nortier, Manager, FAIS at FSB, on regulatory matters, and by SASRIA on their new product (watch an upcoming issue of COVER for information on this).