From tangible to intangible: shifting the focus of commercial insurance in SA

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By Raveen Maharaj, head of broker channel at Nedbank Insurance

There was a time that the main assets of a business were mainly those things you could physically see or touch. Today’s business assets have changed dramatically; but while their form may be less physical, their value is no less important. Given this shift from tangible to intangible assets, accompanied by an increasingly legislated, complex and technology-driven business environment, the commercial insurance industry certainly has its work cut out for it, beginning with the need to fundamentally transform the type of cover it provides to organisations as well as the way in which it provides that cover.

This is not a small ask of the South African insurance industry, particularly given the dynamic and fast-changing nature of business in the country.

For one, as the South African business environment becomes increasingly focused on customer-protection legislation, and organisations adopt customer-centric business models to ensure compliance, the likelihood of very costly litigation defence down the line is increasing exponentially. While such customer focus is undoubtedly a good thing for businesses and their customers, few organisations have historically focused so intently on putting their customers at the very centre of their business models.

Recent customer-biased business legislation, which ranges in focus from treating customers fairly to protecting their personal data, has shifted the goalposts for many of these businesses. And while changing to a customer-centric business model is likely to increase their sustainability and profitability, it also puts them at increased risk of lawsuits if they get it wrong. Since this is new risk territory for many companies, commercial insurers have a responsibility to take the lead in terms of ensuring their clients are adequately protected.

Then there is the changing face of business as a whole and the host of unforeseen and, often, unprotected consequences this transformation can have for companies. Quite apart from the growth in numbers of purely online businesses, the vast majority of so-called ‘bricks and mortar’ organisations today have to adopt highly technology-driven operating models if they want to remain competitive. While this technology can range from the relatively risk-simple, such as secure cloud-based data storage to the highly risk-complex, such as the use of drones, all bring with them inherent risks that would probably not even have been considered by companies a decade or two ago.

The extent of these risks is such that it is no longer enough for the management of a business to make them the problem of an IT department. Such are the challenges of data protection and cybersecurity that legislative compliance now demands that responsibility for these is held at board or executive level. Clearly, accessing effective insurance against these risks is, therefore, also of paramount importance.

The third fundamental shift in the way businesses work, and need to be covered, relates to their employees. As much as customers are enjoying increased legislative protection, so too are employees. The labour market today enjoys significantly higher levels of legal protection than has been the case in the past. And the way people work is also changing dramatically with tele-commuting and home-based employees increasingly becoming the norm. This evolution of the employment environment also brings an entirely new set of data security and litigation risks to bear on businesses as employers, few of which they have had to consider in the recent past.

With all of this in mind, while cover like professional indemnity and directors’ insurance may have been enough in the past, this is simply not the case any longer. The changing face of business in South Africa is increasing the potential for companies to be exposed to rapidly widening liability gaps. In order to close these, there is an urgent need for insurers and their intermediaries to transform their business models and move from being merely cover providers to being business partners with their clients. This demands the delivery of bespoke insurance solutions that are tailored to the unique requirements of each business client and that offer maximum protection, not only against the possibility of litigation by customers, employees or competitors, but also against any potential loss of value of their vitally important intangible assets.

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