Direct Insurance, is it the right move?

We as consumers are being bombarded with advertising, mock TV shows s and call centre telling us that it is better to insure directly and cut out the “expensive” middle man. A large emphasis is placed on the fact that they are irrelevant in the short term insurance realm and even more that they are a pure burden to the consumer. A recent advert comparing a broker to a fish and chip sales person is a clear indication that little regard is being placed on the role of financial advisors and brokers within the short term insurance industry.

The prudent question I believe we need to ask ourselves is whether we believe this propaganda and whether we would want to trust a call centre operator with insuring our valued assets and now even our lives. Let’s take the following points into consideration when unpack direct insurance for ourselves, ignoring propaganda.

It does not take a rocket scientist to understand that the very call centre operator assisting you in obtaining your insurance is in fact a low level employee, irrelevant of earnings, within the company. They are selling high volumes of policies and therefore making it impossible to remember a little thing like your name. If you have a dispute on your claim who would you speak to? The answer is very simple, their legal department. One young man, who alleges on Hellopeter.com that he was effectively bullied by a large direct insurer’s in house legal team into signing documents that eventually led to his claim being denied is proof of that.

Now no one is claiming that the young man is talking the truth about the matter or that the insurance company is in fact bullying clients into not paying claims, the fact that is being brought across is merely that when a dispute arose his communication point was moved from the friendly voice at the call centre to the legal department, an intimidating place for any non legal professional.
Now bringing that into comparison with a broker environment one needs to understand that your broker would be your port of call, not his legal department. If it is warranted that a legal department of an insurer has to get involved you would at least be “protected” if not just escorted by your broker. Your broker is also an individual with a larger vested interest in your well being and naturally concerned with you cancelling other policies with him. He or she is not just a voice.

I would like to re-iterate that this article is not aimed as an attack on direct insurance, although I must convey my surprise that the broker industry has not attacked back with similar vigour. It is merely aimed at providing some perspective within the propaganda.

Have a merry 2010

To all my friends and associates. I wish a fantastic 2010. May the winds of good fortune blow behind you with such vigour that your ears whislte.

Leading by Example

We all lose faith in our idols and they all disappoint us at some stage. Let’s look at world golfing sweetheart Tiger, who by latest count, is already 11 over par with extramarital affairs, Joost “powdering” his nose and a myriad of senior people drunk driving suburbia into a “non-walled” community. However I do think it is prudent that we look at ourselves. We literally gulp up gossip and so called failure of moral value stories but when a Government companies are crumbling left right and centre we just shrug and say something like “This is Africa”.

Julius Ceaser, was renowned and respected for the many battles he fought in the front lines, draped in his customary (very visible) red cloak. Many battles was perceived as lost till Julius arrived with a couple of men and turned the spirit of his soldiers and by that, the outcome of the battle. South Africa is currently fighting a battle against poverty, low moral fibre, despondency and a reputation of fraud and quick fix mentalities. In the forefront on this is the catastrophic board failures at the SABC, Transnet, Athletic SA and basically every state owned enterprise. Is this still the overflow of the Zuma/Mbeki power shift leaving us destitute and confused or is it just pure poor management and poor corporate governance. The more prudent question in fact should be when is our leaders going to put on a red cloak and turn public moral and allow us to win this battle.

Corporate Governance??? This is one of the new buzz words that is uttered over our airways, business corridors and board rooms. However can we see proper corporate governance within our institutions? The red cloak in this instance can be worn in the form as the newly published King III report and the simple application of it. With so many new boards being elected in and so many interim boards heading our transport infrastructure, judiciary, our television broadcasts and even our sports the implementation and application of proper corporate governance via King III should be simple mind set to entrench in these new boards. With the promulgation of the New Companies Act, which is due to come into effect in 2010, we as a general public should actually challenge the Government to take the proverbial tree out of their own eyes before investigating the small thorn in the private sectors eyes.

So to conclude. Make proper ethical, transparent and honest business the norm of government institutions. Make open communication with ALL stakeholders mandatory and stop hiding behind bureaucracy and eloquent language. Is it not the very government that made Plain Language a requirement under the National Credit Act, The Companies Act of 2009 and the Consumer Protection Act.

Having a will?

A Will is a simple, straightforward yet incredibly important document in your personal life. During 2009 seven friends passed on and only 3 had up to date wills. This has left the other four's families and friends destitute and struggling to understand how they should wind up the estate.

Most of us are hitting the roads from this week onwards, the sad reality is that this season has the highest road death ratio for the year and the reality that one of us may not return home after our holiday is very real. It is extremely reckless of all of us to believe that it will not happen to us, as this is what everyone of the "other people" in accidents also believed.

In conclusion, contact your financial advisor, attorney or accountant and get your will up to date. It will be the best Christmas present you can give your loved ones.

Plain Language

Plain Language is now a requirement under the National Credit Act, The Consumer Protection Act as well as the Companies Act of 2008. The only problem is that the definition, as contained in these acts, are in anything but plain language. Although writing a document in plain language sounds incredibly simple, it is however not that simple.

All South African Banks made a commitment to distribute their documents in plain language years ago, with a self imposed target for October 2000. Now not to venture a guess, but I dont get my correspondence in what I term as plain language. So why is it so difficult to write a document in plain language?

Well firstly lets look at the authors, and lets face facts most of them are legal professionals. From the first day at varsity they get taught to write all there documents in Legal English (a sepreate subject for your LLB). This is basically to teach students to write in "high" language and to create ambigious statements, allowing multiple interpretations. So is it our tertiary education system letting us down or is it the ego of our legal profession? I will leave that decision up to you.

That said the important thing that all of us must recognise is that Plain Language correspondence is no longer a mere virtue. It is a requirement in terms of 3 seperate pieces of legislation. This changes the ball game dramitacally within the corporate business world.

S0 I would like to humbly request the legal profession, tertiary eduction services and business owners to focus correspondence and training to write correspondece towards plain language. Paying a fine, having a contract rescinded or losing accreditation is just not worth looking clever in my mind.

Ignorance or Ignoring

King III, the good for proper corporate governance, was published on the 1st of September 2009 and the codes apply to all entities. This is very different to the old King I and King II reports that was only applicable to public or listed entities. The question I however want to ask today is whether the property syndication industry are working along these ethical guidelines.
I firmly believe that they are probably not. This, to me, is evident from the constitution and guidelines of the Public Property Syndication Association (PPSA) that does not mention compliance to any of these codes. Two of the syndication companies I have had dealings with namely Blue Everest Investments and City Capital (Capital Investments), both of which are now defunct never conformed to King I or King II and it did directly apply to them as public companies. Further the Financial Services Board (FSB) also does not mention it at all as one of the 1.8 licence requirements.

Now the next question we have to ask is why? Is it ignorance or just ignoring it. Is it because the cost of compliance is excessive? Well before you answer that question for yourself, let’s look at why compliance to these codes are, at least in my opinion, important.
The King reports are all about conducting an ethical and transparent business. It is about disclosing all the facts to all stakeholders, giving access to required information, it is about accountability of company directors, it is about thinking of others. The codes also places strong emphasis on independent directorship and active shareholder participation. In conclusion it is about playing open transparent cards and honest commentary to everyone involved and respected writers like Bruce Cameron and Deon Basson has been claiming that is the last thing that they are doing.

Now that you have some information to make up your own mind on why the property syndication industry may not be applying these codes let’s focus on being active in demanding the application of the codes. Financial Advisors, Regulators and the public in general should demand the application of King III in all syndicated companies and fractional ownership schemes so that we insure that it is not avoided by ignorance. This will then make it extremely clear which promoters is ignoring ethical, transparent and honest business practices.

If you want to find out more about King III, the New Companies Act or the Consumer Protection Act visit http://www.sinkorswim.co.za/ or contact john@sinkorswim.co.za

People, Planet & Profit

The new King III report puts a much larger emphasis on so called Triple Bottom Line reporting for businesses. Business is not just about making money anymore as it is about how you make the money and whether you take from the people and planet or give to the people and planet.

Obviously as King III applies to all entities it is placing a bigger burden on smaller business to also comply to these codes and therefore we are seeing a bit of resistance to King III. That said King III has an apply or explain approach and therefore I am off the opinion that this approach makes it accessible to most businesses. But what does apply or explain mean? This basically means that you need to apply your mind on how you can comply, do the best you can do to comply and explain why you can’t do more. So basically it is a soft and positive approach rather than the traditional comply or else like in the US system. With the recent global meltdown I am sure we can debate for hours on the success of the more aggressive approach taken by the US government in governance.

I do however believe we need to ask ourselves a more prudent question. Is it good business to comply to King III? Well let’s not debate the legal issues around it but the pure advantage that it will offer you, if any. I think the answer is a resounding YES. Most of us as directors spend 110% of our time working IN our businesses focussing on our functional role within the company and we don’t spent any time working ON our businesses focussing on strategic and long term visions. When complying and applying King III into your business you will force yourself to spent at least some time ON your business and just in that the advantage of compliance is massive.

In conclusion, every change brings opportunity and risk and compliance to King and THINKING about Poeple, Planet and Profit will give more opportunity to you to manage your business effectively. Non compliance only brings risk. So my opinion is: Lets apply King III.

To find out more about King III, the New Companies Act or the Consumer Protection Act please visit http://www.sinkorswim.co.za/