A critical analysis of the new insurance legislation in South Africa,
New players have been allowed to apply and enter this market.ths market looks simple from outside but its really complicated t say experienced personal are needed to operate.The need for underwriters who
understand risk management,assessors, loss adjusters to make sure proper risk management is being undertaken.For them to secure new business it means they are going head to head with market giants
that will result in short cuts for them to win.As they enter the market will they have a large enough share for them to survive factoring costs they will incur to enter such market.
If large players decide to reduce premiums definatly the new players will choke.will new players understand reinsurance?
Twisting the insurers hand to reinstate policyholders on the same terms as previous though not mandatory .this will result in increase in moral hazards,morale hazards etc as the insurer has to undertake risk
assessments .some policies to be settled in 48hrs leaves room for increased hazards and fraudulent activities to increase because the insurer should also not be disadvantaged.Same as scrapping off excesses on life assurances
from a legal point of view seems the right thing to do but what of the acturial evaluation point of view?.insurance is based on mathematical calculations thus when the variables are altered
problems will surely arise in the near future.
Restricting and or removal of waiting periods.one has to understand the reason for such clauses though they have been abused by insurers in the past.Trying to decrease competition between between insurers by removing waiting periods to
other insurers is not ethicaldepartments l.Insurers ten to operate on a loss minimization principle and insurable interest has to be established so as to let no one over benefit from insurance.thats why the waiting periods were introduced
Capping insurance policies only disadvantages the insured for the obvious class stratas in society.other industries such as banks will benefit as they have competative products which offer higher
returns ,trust funds etc.worse of removal of investment elements will leave insurance not attractive as other sectors eg banking sector will benefit as one will find it better to put money in banks,unit trusts etc than insurance because of returns
unlike other sectors new products are deficult to introduce because this contract will give payout after an agreed event has taken place so to experiment with new products is hard eg contracts run wellover 50 years for only a fund to crush.and also
costs which come with new products who will attend t them?
It also aims to turn informal insurance providers into formal, regulated and resourced insurance providers.will they have skilled personel ( acturial scientists,underwriters)
framework has been developed to improve policyholder protection and contribute to financial stability through aligning insurers’ regulatory capital requirements with the underlying risks.This
will result n other insures losing business (even though reinsured).New players will find it dificult because players already in the market might amalgamate to meet capital requirements thus attract
large risks.Insurance basics dictate that insurance runs on law of contributions and not necessarily capital ,to make it clear Reinsurance market is international business so capital and risk cant be said to have an inseperable bond
The part that concerns me the most is clearly this changes where brought on to help the insured but n consideration of the insurer to a larger extent i think such market decisions should be made only by insurance technicians.Yes the market needs
legislation but most of the changes made for me i think the market forces should decide the best way for this industry.