With a little focus, it does seem that capital requirements will be quite a challenge and some of this is reflected in the machinations at Lloyd’s where syndicates have been pressured to deal with the costs of doing business, financial underperformance and reviewing business plans for improvement. This has resulted in numerous syndicates closing and others applying stricter underwriting controls. It has been tough but the willingness to change will pay a dividend.
The South African market needs a similar commitment to change. Assuming claims experience matches that predicted, 2020 will need to focus on improving returns on capital, with both internal and channel cost of doing business as key drivers. Our regulatory framework in the area of outsourced practices and binder fees may become a challenge, especially when overlaid with the need to remove wasteful and costly inefficiency, noting widespread duplication of effort appears rife. Associated with this cost impact on return equations, will come incremental PA and FSCA capacity to enforce sustainable and ethical business practices, with the consumer, correctly, top of mind.
As an industry body, SAUMA represents the UMA. Not all UMAs are members of SAUMA but it is necessary to note that brokers, insurers and reinsurers can rely on the gatekeeper role of SAUMA in the promotion of its members, their expertise, service standards, ethics and entrepreneurship.
With regulatory change on the horizon, in the guise of COFI, and the voracious world of technology bringing competition rapidly to market, 2020 will likely require a significant refocus on business models and organisation. This will mean the adaptation of internal systems and adoption of external systems, with agile connectivity, to process and transfer data and remove transactional cost and friction. This will test market dynamics and relationships but the end game of satisfied customers, improved market reputation, development into new markets and new products should result in better returns.
The members of SAUMA will certainly play their part. The year ahead will be important to the UMA as the effort to reposition the UMA in the market takes shape. This effort recognises that the UMA is not an intermediary but is rather aligned to the interests of its insurer principal and the risk-taking capital side of the insurance industry. Although the UMA is already the most cost efficient model, delivering high quality product to the insuring public and sustainable quality returns, the UMA will continue to be challenged to remain competitive by reducing business costs and simultaneously maintain high-quality risk assessment, pricing, claims service standards and product development. The UMA that achieves this will gain market share and thrive.
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