South Africa’s short-term insurance industry needs to encourage more claims suppliers to become black economic empowerment (BEE) compliant, according to the country’s second-biggest short-term insurer, Mutual & Federal.
In terms of the Financial Sector Charter, financial institutions have committed to the implementation of a targeted procurement strategy aimed at enhancing BEE. The target for the value of all procurement from BEE-accredited companies was set at 50% by 2008 and at 70% by 2014.
In addition, financial institutions need to provide support to black-owned small and medium enterprises (SMEs) to enable them to benefit from these procurement programmes, and to promote early payment for services rendered.
“Although procurement includes all spend on goods and services, the biggest spend in the short-term insurance industry lies with claims and therefore also represents the biggest challenge,” says Keith Kennedy, executive general manager: claims at Mutual & Federal.
But he adds: “There are currently just not enough claims suppliers available that are BEE-compliant. The challenge, therefore, is to source more of these suppliers and encourage non-compliant suppliers to move towards a BEE-accredited status.”
Mutual & Federal spends about R4-billion on claims yearly, of which a third is spent on the actual replacement of commodities, says Kennedy, and this is where the need for suppliers comes in.
“Mutual & Federal’s motor book takes up a huge component of its claims spend. Again, the challenge lies in finding BEE-compliant suppliers within these specialist areas,” says Kennedy.
Over and above the sourcing of compliant suppliers, the insurer also has to uphold excellent service and quality.
“Policyholders expect the best and they deserve the best,” says Kennedy. “Therefore, although we fully support the Financial Sector Charter, we need to do so responsibly without compromising the quality of the products and services we offer.
“Having a motor-vehicle claim can be a traumatic experience for a policyholder and we must ensure that the repair process is absolutely painless.”
Mutual & Federal, he believes, has to guard against fronting and window-dressing in terms of BEE accreditation. Should too much pressure be put on suppliers too quickly to transform, some may resort to “superficial” compliance.
“Mutual & Federal is serious about BEE. We support true, broad-based economic empowerment. We are dealing with building, plumbing, electronic and vehicle-repair suppliers, to name but a few. To expect all of these suppliers to become compliant overnight is unrealistic because the skills pool needs to be developed,” comments Kennedy.
The challenges that lie ahead are substantial, and Mutual & Federal is committed to finding a solution and treating BEE procurement as a top priority.
Kennedy warns, however, that the fears of traditional suppliers need to be taken into consideration.
“Many of them believe that if they are not compliant, they will lose their work, which means a loss of livelihood.”
It’s also important to note that the suppliers of the short-term insurance industry operate within the medium to smaller sectors of the economy, which means many of the company’s suppliers are owner-managed.
“So, while on the one hand it’s not easy to source compliant suppliers, we know that when we do, we are making a real difference,” he says.
No short-term insurer can function without its suppliers. The answer, therefore, lies in supporting the development of SMEs and encouraging other suppliers to transform and become BEE-compliant.
“In that way we can develop and build our industry, contribute to the overall growth of the economy and people of South Africa and still maintain excellent levels of service and quality,” Kennedy says. — I-Net Bridge