JOHANNESBURG – One of the premium collectors on behalf of which Insure was collecting premiums are Santam Insurance Company.
The Insure Curators latest update 31 October 2018 – Market Update 8 stated that all premiums have been repaid: “For those Clients that have continued to support IGM, all premiums have been paid to insurers on October 15.”
We phoned the chief operations officer (COO) of Insure, Ian Du Toit and he confirmed that the Market update was, in fact, incorrect and that the statement should read: “All premium other than that of August 2018 have been repaid. (Leaving as much R1 200 000 000 withheld from Insurers).”
We asked some questions to Santam, the JSE-listed leading short-term Insurance company – there are at least thirty other Insurers affected:
- We have not seen any SENS announcement from Santam and we wish to inquire when you intend to do so.
- In addition, we would like to know what amount is due and outstanding to Santam and whether you anticipate the impairment of this amount and to what extent.
- We would also like to inquire whether Santam intends to take any steps to lessen their future exposure to Insure due to this incident.
We received a rather vague reply from Santam, which was devoid of specifics contained in our questions and sheds no light on the extent and or severity of the potential impairment to the shareholders of Santam as management perceive the matter at this point:
Insure Group Managers response from Santam as per Thabo Mabaso, the head of corporate communications at Santam:
The Insure Group Managers (IGM) is an independent financial services company, providing premium handling services including debit order collections, deposits and premium disbursements on behalf of insurers and brokers. Their aim is to simplify the administrative burden of premium handling for both intermediaries and short-term insurers. IGM performs the critical role of collecting premiums from client bank accounts and paying them to insurers on a monthly basis. Santam currently has agreements with a number of premium collection agents, including IGM.
We have recently become aware that IGM may have liquidity issues. As a responsible corporate, Santam together with other insurers communicated its concerns and highlighted the potential risks of this matter to the Financial Sector Conduct Authority (FSCA), which duly intervened and appointed a Statutory Manager to assist in managing the risk. The FSCA subsequently agreed with IGM that it will be put under voluntary curatorship to address the financial stability of the business. Mr Pieter Bezuidenhout was appointed as curator on 14 September 2018, with the mandate of de-risking the business and maintaining it as a going concern. Should you have any questions relating to relationship between VBS and IGM, we would advise that you speak to the curator.
While the IGM situation poses some risk of timeous premium payment to us and other insurers, Santam would like to assure all its clients that they will not be impacted by this situation at all, and that there will be no material impact on our solvency, liquidity or ability to pay claims.
We are working with the South African Insurance Association (SAIA) and the FSCA to ensure the stability of premium collection going forward. We also encourage all intermediaries to remain committed to the current premium collection process and providers to maintain the stability of the whole industry.
In the event of a payment default by IGM, there may be short-term impact on our profit margins. As a leading insurer we have a robust business that is more than able to withstand such shocks, although we deem the situation to be hugely regrettable. We want to emphasise again that this issue will have no detrimental impact on any policyholder.
We would like to assure our clients that insuring with an established, good and proper insurer truly enables them to have peace of mind at all times.
From a Public interest point of view Santam’s statement does offer their clients some comfort. From the point of view of shareholders invested in Santam, as a listed entity we feel more disclosure is required.
We do realise that it is in no-one’s interest to create panic or to create distrust in the premium collection system, but we believe the situation that was allowed to unfold is indicative of the vulnerability inherit in a very large component of our financial system.
When R1.2bn does not reach its intended destination, be it a mere delay, we can only hope it is not the tip of an iceberg.
When dealing with other people’s money the rules and discipline should apply as if the custodians are handling their own money. Clearly world-wide money systems are still way short of perfect regarding the custodianship of other people’s money.
People often place trust in third parties that are undeserving of their trust. When risk needs to be assessed, what matters is the possible negative outcome, not the fact that it should not matter, as is not their own money.
There is a joke going around: A guy on board the Titanic asked his friend, “why are you crying? To which the guy replies: the ship is sinking, the ship is sinking. His mate replied: stop crying man, it is not your ship.”
In our next article, we focus on the different approach the Hawks and or the Public Prosecuting Authority may have compared to the Regulators, Liquidators and Curators.
Corrie Kruger is an independent correspondent.
BUSINESS REPORT ONLINE