Have you seen the big buildings going up in Sandton over the last few years? Many of those house large global legal firms. These firms have grown substantially and all have large global footprints due to the immense increase of regulation and subsequent liability exposure to large corporates and executives managing those corporates. The liability insurance industry has kept pace with these developments, offering a wide variety of liability insurance covers. We spoke to SHA’s Simon Coleman aka The Liability Guy for an overview of the industry.
COVER: When it comes to liability insurance in South Africa, where does the premium come from?
Simon: The term liability insurance can be misleading. One could be forgiven for thinking only about the traditional public and product liability premiums as most of the insurers offer this type of cover. However, the net really needs to be cast a bit wider if one considers that several other specialist insurance products also contain third party liability elements such as professional indemnity, cyber liability, financial institutions covers, medical malpractice, directors and officers, pension fund trustees, pollution and some others. Given that most businesses have a general liability exposure but do not provide the services necessary to warrant some of the other covers mentioned, that more traditional cover probably still makes up the backbone of the liability premium pool.
COVER: How has this grown over the past decade?
Simon: We’ve seen a marked increase in D&O and General Liability largely due to legislative changes in the local environment. The advent of the New Companies Act and the Consumer Protection Act did much to promote the public awareness of consumer rights and the ensuing responsibilities of businesses. We’ve also seen covers widening to accommodate a lot of new exposures. Most insurers made a switch to broadform in 2011 when the CPA came out and the demand for cyber liability covers seems to increase with every well publicised hacking attack (although we’ve yet to see a local mega attack hit our headlines). One also cannot ignore the fierce competition in the specialist environment. Whilst the need for liability based covers has increased, the premiums have been kept at relatively modest levels, ultimately benefiting the consumer.
COVER: Is this a result of insurers pushing this line, or due the a growing need for this type of cover?
Simon: A combination of legislative change and public awareness is largely responsible. I’d say insurers have gotten better at talking to the media about liability exposures which helps business owners understand the relationship between litigation and insurance. In the past 12 months at SHA we’ve been asked by TV, Radio and general press to comment on many major incidents. I believe this is important because it shows that even the media are making the connection between accidents/ events and the specialist insurance industry. As with any insurance offering, sales increase when there is uncertainty about risk. Every legislative movement brings uncertainty. POPI, Companies Act, CPA, Labour Relations Act all contribute to the success of a myriad of specialist covers.
COVER: How does SHA approach the growth and expansion of your market? Does this include areas north of our borders?
Simon: SHA has been a major player in the local market for the better part of 30 years so we’ve seen many insurance peaks and troughs as far as claims and competitiveness go. We’re constantly innovating with technology and insurance products to make sure the businesses we insure have access to cutting edge insurance solutions. We are active outside of SA and we support the greater Sanlam and Santam initiatives throughout Africa, South East Asia and India from our office in Johannesburg. Dealing with liability covers outside SA obviously has challenges due to language barriers and varying legal systems but we have an excellent and diverse team who meet the challenge on a daily basis.
COVER: What role is technology playing in reaching and growing your markets? How are brokers taking to this?
Simon: We are very passionate about this. We launched our Pocket Underwriter in March 2015 and in October we just passed 2200 users of the system. This tool enables us to deliver our products to markets across South Africa and indeed across the African continent in a consistent manner.
COVER: How do you rate the liability cover skills and knowledge locally amongst insurers and brokers?
Simon: I think there has been a great improvement. Most brokers understand the need for specialist covers although they still ask us for guidance in explaining the detail to their clients and that’s ok. The specialists need the marketing and relationship skills of the brokers as much as the brokers need the technical expertise of the underwriters. A mutually beneficial relationship. We do however, need to guard against over commoditisation of specialist insurance products because that in turn leads to an underestimation of the risk. A client paying a low premium of R100 a month for a specialist product might be convinced that the cover doesn’t warrant careful discussion with their broker. The perception of value may be skewed and depending on the type of business and the exposure, that specialist policy could be the one that determines survival after a messy law suit.