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					          “Working together for a skilled tomorrow”




EXTRACT TAKEN FROM DRAFT SECTOR
     SKILLS PLAN 2005 – 2009

              WHICH COVERS:
       ü PROFILE OF INSURANCE SECTOR
ü DEMAND FOR SKILLS IN THE INSURANCE SECTOR
 ü SUPPLY OF SKILLS IN THE INSURANCE SECTOR
 ü INSURANCE SECTOR’S SKILLS DEVELOPMENT
                  PRIORITIES
                                                                          Page 2




Introduction




Research of the Sector Skills Plan (SSP) 2005 -2009 commenced in September 2003
where with the assistance of Grant Thornton, an intensive consultation process with
stakeholders involving personal interviews, questionnaires, stakeholders workshops
and forums was undertaken.




The information obtained through the consultation process has been encapsulated in
the draft Sector Skills Plan.
                                                                                     Page 3



Chapter 1: Profile of the Insurance Sector




Chapter Objective

To set the scene for skills development in the sector, viz:

•     Identification of key issues, policies changes or other developments since the previous
      SSP;
•     Implications of the new NSDS on the sector.

The Chapter should provide a snapshot of the key economic indicators in the sector, with an
analysis of geographic concentration, trends (growth or decline), challenges and
opportunities.



1.1      Sector Definition

1.1.1 The insurance sector

The Insurance Industry is in the business of insuring persons or property. Insurance
inco rporates the “coverage by a contract binding a party to indemnify another against
specified loss in return for premiums paid”1.

The South African insurance industry is an important contributor to the economy, a major
employer and a significant source of earnings. It provides support for other industries and
individuals in a number of ways, from commercial, life, car and household insurance to
pensions and savings. The South African insurance industry is by far the largest in Africa
(accounting for 93% of the continent’s premiums in 2003)2.

The popularity of insurance as a savings vehicle as well as its valuable protection role, gives
South Africa the highest penetration (premiums as a percentage of GDP) in the world at
18,8% (life assurance accounts for 16% and non -life 2,9%).

1.1.2 SIC codes covered by the sector

Broadly the insurance sector can be divided into 2, viz: the life and non-life sectors. Each of
these in turn is supported by brokers or intermediaries and can be broken down into further
sub-sectors. The sub-sectors incorporated into the insurance sector, by SIC code are as
follows:
                                                                                    Page 4



Table 1.1: Insurance industry Sub-Sectors by SIC Code
 Insurance Industry Sub-Sector                                                       SIC Code
 Unit Trusts (or Collective Investments)                                             81901
 Risk Management                                                                     81902
 Insurance and Pension Funding, except compulsory social security                    82100
 Life Insurance                                                                      82110
 Pension Funding                                                                     82120
 Health Care benefits Administration                                                 82131
 Short-term Insurance                                                                82191
 Funeral Insurance                                                                   82192
 Reinsurance                                                                         82193
 Activities Auxiliary to Insurance and Pension Funding (brokers/intermediaries)      83300


1.1.3 Sector contribution to GDP

According to SA’s National Treasury department, the financial services sector (which
includes insurance) accounts for some 8,7% of GDP. Overall insurance accounts for around
2,8% of national GDP.

In 2002 the life sector grew by some 7%, but this is expected to have waned in 2003. South
Africa has 1% of the global life market.

In terms of the non -life sector, South Africa has only 0,3% of the global market. However, in
2002 this sector grew by some 8,5% in South Africa.

In South Africa non-life premiums amounted to some US$64 per capita in 2002, whilst life
premiums per capita were US$368 (compared to US$1 031 per capita for non-life and US$1
450 for life in industrialised countries).

South Africa generates 93% of all premiums in Africa.



1.2     Profile of Employers in the Sector

1.2.1 Number of employers

There are no accurate statistics on the number of employers in the insurance sector.
However, according to the Department of Labour’s (DoL) national database, there were
some 4 870 active insurance sector employers registered with SARS in the period May 2003
to January 2004. Of the 4 870 active companies some 98,5% are classified as parent
companies whilst 1,5% are considered to be subsidiaries or branches of a parent company.
                                                                                                    Page 5



In addition, INSETA is aware that there are a significant number of small and informal
enterprises in the sector (often owner -managed insurance brokerages or intermediaries),
which are not formally recorded on the national database. The number of such companies is
unknown.

1.2.2 Number of employers by sub -sector

Based on the DoL insurance sector database the distribution of active employers by sub -
sector is diagrammatically depicted below.

Graph 1.1: Distribution of active levy paying employers by sub-sector

                                                                        Unit Trusts

                                                                        Risk Management

                                     1%                                 Insurance and Pension Funding
                                       2%
                                                                        Life Insurance
    1%        18%                                    20%
   1%                                                                   Pension Funding

                                                                        Health Care Benefits
                                                                        Administration
                                                                        Short-Term Insurance
       30%                                             23%
                                         2%                             Funeral Insurance

                                      2%                                Reinsurance

                                                                        Activities auxiliary to financial
                                                                        intermediation



Source: DoL/SARS database


The Short-Term Insurance sub -sector accounts for almost a third of all organisations in the
insurance industry, whilst Life Insurance and Pension Funding together account for a further
45% of the industry. In terms of number of organisations, the Unit Trust, Risk Management,
Health Care Benefits Administration, Funeral Insurance and Reinsurance sub-sectors each
contribute 2% or less to the total number of employers in the sector. Insurance brokerage or
intermediary companies account for 18% of the organisations in the sector (although some of
the intermediary/broker companies align themselves with the type of product that they are
selling as opposed to the intermediary sub-sector).

However, it is important to note that many insurance companies offer more than one type of
service (i.e. a life insurance company may offer funeral insurance) and would therefore only
be classified in one sub-sector.
                                                                                               Page 6



1.2.3 Number of employers by size of payroll

76% Of employers in the insurance sector have an annual payroll of less than R500 000.
The majority of these employers are, in general insurance intermediary companies,
brokerages or financial advisors and are generally referred to as SMMEs. 5% Of employers
have an annual payroll of more than R4 million – the majority of these companies are large
and super-large insurance companies.

Graph 1.2: Number of employers by size of payroll




                           5%
               6% 4%                                                  0-R500 000
         9%
                                                                      R500 000 - R1mil
                                                                      R1mil - R2mil
                                                                      R2mil - R4mil
                                                                      >R4mil
                                                76%




Source: DoL/SARS database


1.2.4    Geographical distribution of employers

43% of all active, levy paying insurance sector companies operate out of Gauteng, whilst
20% operate primarily in the Western Cape and 15% in KwaZulu -Natal. The remaining 22%
of organisations are distributed among the 6 other provinces (with the Northern Cape having
the smallest share of insurance sector companies).

Graph 1.3: Provinicial distribution of active levy paying employers




                                                                               Gauteng
                                                                               Limpopo
                          1% 5%
            20%                                                                Mpumalanga
                                                              43%              North West
                                                                               KwaZulu-Natal
          6%                                                                   Eastern Cape
                                                                               Western Cape
                 15%                           3%
                                 3%    4%                                      Northern Cape
                                                                               Free State




Source: DoL/SARS database
                                                                                       Page 7




1.3      Profile of Employees in the Sector

1.3.1 Number of employees

According to the Stats SA Labour Force Survey some 1 079 million people were employed (1
million formally and 74 000 informally) in the financial intermediation, insurance, real estate
and business services sector in September 2003 – 52 000 (or 5%) more people than in
March 2003.

Utilising employee demographic information from WSPs received and research undertaken
to inform this and previous SSPs, we estimate that there are some 108 000 people formally
employed in the insurance sector in 2003 (or 10% of the total number employed in the
business services sector in SA). This figure excludes all employees of micro and informal
businesses.

Comparing employee numbers across organisations that have submitted WSPs to INSETA it
is clear that the number of employees in these formal (and often large) companies has
increased during the period 2001 to 2003 (from 51 945 employees in 157 companies in 2001
to 72 326 in 163 companies in 2003). In fact INSETA’s previous SSP estimated that some
95 000 people were employed in the formal insurance sector in 2001 – some 13 500 less
than current estimates. However, the total number of active enterprises or organisations in
the sector has decreased in the same period.

Research conducted by Grant Thornton to determine the number of financial advisors that
would be impacted by the Financial Advisory and Intermediary Services (FAIS) Act indicates
that there are some 75 000 financial advisors in South Africa, of which 23 000 work for large
organisations (insurance companies, banks, etc). The remaining 52 000 people are
classified as external advisors i.e. independent intermediaries, or alternatively work for formal
insurance intermediary/broker companies. We do not know how many of the external
advisors have been captured in our calculation of the total number of employees in the
sector. However, we do know that a large proportion of the 52 000 external financial
                                                                   nd
advisors are likely to be independent, self-employed brokers a therefore have not been
included in the 108 000 employees in the sector.

Table 1.2: Number of internal and external financial advisors
                                     Number of Financial Advisors
 Type of Advisor                                                    Number (and %)
 Internal Advisors                                                  22 950 (30.6%)
 External Advisors                                                  52 050 (69.4%)
 Total Financial Advisors                                           75 000 (100%)
Source: Grant Thornton Research
                                                                                    Page 8



We also know that over and above the number of recognised financial advisors, there is a
significant number of “runners” or broker assistants who sell funeral policies on behalf of a
recognised broker or insurance company. The number of these runners is unknown but it is
estimated that there may be some 50 000 such people informally employed in this job
category – these individuals have not been included in our total employee estimation.

1.3.2 Provincial distribution of employees

As with the provincial distribution of insurance companies, the bulk of the sector’s employees
(who are formally employed i.e. excluding intermediaries) are located in 3 provinces viz
Gauteng with 40% of all employees, Western Cape with 34% of employees and KwaZulu -
Natal with 9% of employees.

Although 20% of employers are located in the Western Cape these companies employ 34%
of the formal workforce – indicating that super-large companies are located in the Western
Cape. Conversely in KwaZulu-Natal there are a number of smaller sized companies in terms
of employee numbers.

Graph 1.4: Provinicial distribution of employees




                                                           Gauteng
                                                           W.Cape
40%                                                 34%    E.Cape
                                                           N.Cape
                                                           Free State
                                                           N.West
                                                           Mpumalanga
                                             6%
                   9%          2% 3% 2% 3%1%               N.Province
                                                           KZN




Source: INSETA 2003 WSPs


1.3.3 Employees by occupational category

Of the 72 000 employees (two thirds of the workforce in the formal insurance sector)
employed in 163 different companies, 26 000 or 37% work in clerical / administrative
positions. Service and sales workers account for the next largest proportion of employees in
these formal businesses (23%) whilst technicians and associated professionals account for a
further 21% of employees. Senior managers, owners and junior managers together account
                                                                                            Page 9



                                                                     e
for 8% of employees and professionals for 7%. Proportionately ther are very low numbers
of craft/trade workers, plant/machine operators, labourers and learners in the sector.

Graph 1.5: Employees by occupational category
                                                                       Senior Officials & Managers /
                                                                       Owner Managers
                                3%                                     Professionals

                           0%                                          Technicians (and Associated
               1%                                                      Professionals)
                           0%                                          Clerical / Administrative
              0%
                       4%                    4%           7%    21%    workers
              0%                                                       Service (and Sales) Workers

  23%                                                                  Skilled (Craft and Related
                                                                       Trade) Workers
                                                                       Plant / Machine Operators and
                                                                       Assemblers
                                                                       Labourers ( / Elementary
                                                                       Workers)
                                                                       Middle to Junior Management

                                       37%                             Section 18 (1) learners

                                                                       Section 18 (2) learners

                                                                       Temporary / Additional /
                                                                       Contract Workers
Source: INSETA 2003 WSPs


1.3.4 Employees by race

White employees account for almost 50% of all people formally employed in the sector. This
percentage has decreased slightly from 2001 when white employees accounted for 51% of
the total employee base.

Graph 1.6: Employees by race




                                                               26%


    49%




                                                                 17%
                                                  8%


                 African    Coloured    Indian    White

S ource: INSETA 2003 WSPs
                                                                                Page 10




The ratio of indian and coloured employees has largely remained unchanged between 2001
and 2003 (17% and 8% respectively) but the percentage of african employees has increased
by 1%. However, given that the sector has actually increased in size in terms of employee
numbers, the number of african, indian and coloured employees has increased by some 11
200 jobs over the 2-year period. The number of white employees has also increased
between 2001 and 2003 by some 9 100 jobs.

1.3.5 Employees by gender

Females continue to dominate in the insurance sector – accounting for 58% of all employees
in the sector. Between 2001 and 2003 the ratio of females to males in the sector has
remained unchanged – however, the number of employees of both genders has increased
(some 66 add itional females and 45 additional males per company).

Graph 1.7: Employees by gender




                                         0%


                                                            42%




         58%




                                 Male   Female   Disabled


S ource: INSETA 2003 WSPs

1.3.6 Employees by gender and race

White females account for almost 30% of all employees in the insurance sector and white
males for a further 20%. There are, however, more african female than african male
employees in the sector. Likewise there are more coloured female than coloured male
employees.
                                                                                                             Page 11



Graph 1.8: Employees by gender and race



                                                                                                    African
                                                                                                    Male
                                                                                                    Afrcan
                                                                                                    Female
                                                                                                    African
                                          0%                12%                                     Diasbled
          29%
                                                                                                    Coloured
                                                                                                    Male
                                                                                  14%
                                                                                                    Coloured
                                                                                                    Female
                                                                                                    Coloured
                                                                                                    disabled
                                                                                                    Indian Male
                                                                                     0%
                                                                                    7%              Indian
                                                                                                    Female
                                                                         10%                        Indian
                  20%                                           0%
                                          0%    4%                                                  Disabled
                                                           4%
                                                                                                    White Male

                                                                                                    White
                                                                                                    Female
                                                                                                    White
                                                                                                    Disabled

S ource: INSETA 2003 WSPs

1.3.7   Employ ees by race and occupational category

Graph 1.9: Employees by occupational category and race




                              100%



                               80%



                               60%



                               40%



                               20%                                                                                White
                                                                                                                  Indian
                                                                                                                  Coloured
                                0%
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Source: INSETA 2003 WSPs

White employees dominate in all levels of management in the insurance sector (accounting
for 85% of all senior management positions and 70% of junior/middle management
positions). In administrative/clerical and sales/service positions white employees account for
                                                                                   Page 12



less than 50% of employees. However, white employees also dominate professional
occupational categories. People of colour account for slightly less than 50% of employees in
technical occupational categories.

These percentages have largely remained unchanged between 2001 and 2003.

1.3.8 Employees by gender and occupational category

Although the ratio of females to males looks promising – although slightly skewed in favour of
females – the picture is significantly different for different occupational categories.

White males dominate in senior mangement, middle management and professional
positions.

Females working in the formal insurance sector tend to dominate in clerical or administrative
positions. Sales positions still tend to be dominated by males.

Graph 1.10: Female employees by Occupational Category

                                  50%
                                  45%
                                  40%
                                  35%
                                  30%
                                  25%
                                  20%
                                                                                    White
                                  15%
                                                                                    Indian
                                  10%
                                                                                    Coloured
                                   5%
                                   0%                                               African
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S ource: INSETA 2003 WSPs
                                                                                   Page 13



Graph 1.11: Male employees by Occupational Category


                               30%

                               25%

                               20%

                               15%
                                                                                   White
                               10%                                                 Indian
                                                                                   Coloured
                               5%                                                  African


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S ource: INSETA 2003 WSPs



1.4       Drivers of Change

1.4.1 Drivers of change impacting on the international insurance sector2,3,4,5

1.4.1.1              Economic changes

The international insurance industry was considered to be stable in 2003 following 2 difficult
years. In 2003, the recovery of international stock markets helped the life insurance sector,
whilst the non -life sector benefited from further increases in premium rates. Despite these
improvements, globally the capital base for the insurance sector is still considered to be
weak.

Growth in the life market in industrialised countries was some 1,9% in 2002 – attributed
mainly to increasing demand for annuity and pension products as well as the decline in social
state insurance systems. However, the life market grew by some 12,7% in emerging
countries (and around 7% in Africa) in 2002.

In 2002, the non-life market grew by some 9,1% in industrialised countries and 10,7% in
emerging countries. This growth spurt has been attributed to increased premium rates.
                                                                                    Page 14



Globally the emerging countries (which includes South Africa) only generate some 10% of
total global premium income. Africa only has 1,2% of the global life market and 0,6% of the
global non-life market.

Internationally, the insurance industry is focusing on:

•   Building customer relations;
•   Fine-tuning product portfolios to focus on customer lifestyle needs (focusing on
    specialised products); and
•   Managing risk through product diversification and geographical spread.

1.4.1.2 Political and Legislative Factors

Globally many countries have recently or are currently implementing legislation to formalise
and manage the insurance sector. In general, this has ramifications for the global insurance
market – with an increased emphasis on skills development and training of personnel. In
many countries, the introduction of legislation has impacted on the credibility of the
broker/intermediary and has forced changes in the way these individuals and companies
operate. For example in the United Kingdom the introduction of legislation has led to the
demise of a number of independent brokers (estimated to be between 10% to 30% of the
independent broker pool) and has forced the formation, via amalgamation, of new broker
companies.

In some emerging countries the introduction of obligatory insurance has led to an increase in
demand for insurance products.

1.4.1.3 The role of insurance brokers

Insurance brokers represent the insured, by obtaining insurance coverage and providing risk
management services on behalf of their clients.

Globally the role of the insurance broker has started to change over the past few years. The
influx of direct distribution channels (particularly for the short-term insurance industry) has
resulted in broker services being bypassed. In Australia and New Zealand insurers sell most
personal lines business directly to customers, however, elsewhere brokers still hold over
30% market share (in the personal lines market).

However, in spite of the increased reliance on direct distribution channels, the role of the
broker is becoming increasingly more important – internationally there is a growing demand
for specialised brokers. The role of the broker has changed from one of a matchmaker to
that of a service provider to both the client and the insurance company. In addition broker
remuneration is increasingly based on service fees as opposed to commissions.
                                                                                      Page 15



Internationally banks are starting to play an increasingly important role in insurance
distribution. In the United States banks own 10% of the country’s broker market.

In order to gain economies of scale and increase geographical reach, many independent,
small and medium-sized broker firms are consolidating. In general smaller firms are willing
to sell due to eroding margins (as a direct results of the increased costs of complying with the
regulatory requirements) and the inability to meet the increasing expectations of their clients.

In the longer term it is anticipated that brokerages will:

•   Focus on improving underwriting quality;
•   Provide additional risk management services for their clients - it is believed that the risk
    landscape is and will become more complex;
•   Expand into emerging insurance markets in order to grow their businesses;
•   Expand globally as clients demand global services; and
•   Improve their analytical skills as clients become better informed.

1.4.1.4 Technological Factors

Globally the insurance sector is becoming technologically advanced – throughout the
organisation but with a particular emphasis on improving underwriting performance. This has
a direct impact on the need for skills development of existing employees to meet these
continual advancements.

1.4.1.5 Environmental Factors

From an environmental point of view, the insurance sector anticipates that the earth will be
increasingly influenced by climatic change resulting in increasing numbers of natural
catastrophes. This could have a knock on effect for increasing demand for insurance cover
to help reduce exposure as well as increasing claims emanating from these catastrophes.



1.4.2 Drivers of change impacting on South Africa’s insurance sector

1.4.2.1    Policy and legislative factors

There are more than 140 identified legislative Acts that directly and indirectly relate and
impact on the insurance sector. In general the sector believes that the industry is over
regulated leading to the “smothering” of business initiatives and limiting entrepreneurial flair.
In addition adherence to legislation is believed to increase operating costs and hence
product pricing which in turn limits general accessibility to products (especially in the lower
LSM groupings). Conversely the positive impact of this legislation is an improved industry
profile in which consumers can trust.
                                                                                         Page 16




However in spite of all the influencing legislation, the recently introduced Financial Advisory
and Intermediary Services (“FAIS”) Act, aimed at professionalising the insurance sector has
had, and will continue to have, the greatest impact on the insurance sector. In fact, at
present the implications of the FAIS Act on business operations in the South African
insurance sector is one of the two key factors that keep managers and CEOs awake at night
(the other factor being the Financial Sector Charter). In addition, at present this Act is the
primary area of concern for, and influence on, insurance intermediaries or brokers. A
summary of the FAIS Act is provided as an Annexure to this document.

Large insurance sector companies in general believe that they have, or are implementing,
adequate systems to deal with the FAIS legislation. However, in many cases companies
have diverted their FAIS responsibility to the independent insurance intermediary or broker
who, in general, does not have the in-house systems or ability to meet the FAIS fit and
proper requirements. In addition, there is concern that intermediaries or brokers selling
funeral and related policies will not make the FAIS Fit and Proper minimum requirements in
terms of skills development by the 30 September 2004 deadline. During the research
conducted for this SSP it was determined that brokers/intermediaries are consumed by the
implications of the FAIS legislation on their businesses. In particular they believe that FAIS
will result in:

•   Job losses – due to the inability of a large number of existing brokers to comply with the
    FAIS Fit and Proper requirements;
•   Increased costs – the high cost of compliance will force brokerages to merge or close
    down;
•   The sector being recognised as one of high risk in which to operate – there is a
    significant risk to the broker if he/she offers bad advice or service; and
•   Brokerages not employing new financial advisors due to the reliance on the credibility of
    the person and hence risk to the business.

The impact of FAIS legislation on the sector is expected to:

•   Consolidate the short-term sector;
•   Force brokers/intermediaries to reassess their role in the sector. Some brokers are
    expected to exit the sector as they realise that they will not be able to, or not be willing to ,
    comply with the legislative requirements. However, many brokers will re-dedicate
    themselves to the sector; and
•   Encourage smaller firms in particular to consolidate their resources to reduce the cost of
    compliance viz the need for ongoing investments in systems, training and record keeping.

Most large companies believe that they will deal with FAIS through:
                                                                                      Page 17



•   Restructuring departments (including reducing the number of internal financial advisors in
    the organisation);
•   Implementing specific training programmes for internal advisors; and
•   Implementing retention strategies and succession planning to hold onto qualified
    employees.

Many large companies believe that FAIS will impact negatively on the organisation in the
short term by increasing direct costs as companies ensure that they comply with the
regulations. “Old Mutual has sacrificed sales as it moved to accredit its sales team ahead of
the introduction of the FAIS Act – Sales were down 18% in the 1 st quarter of 2004” – Old
Mutual

However, although a concern for the sector, in the long term the FAIS Act is considered to be
an overall positive factor influencing the insurance sector (receiving an average score of 0,7
out of 1 on a positive rating scale from the more than 100 companies that responded to our
industry questionnaire). “FAIS rewards professionalism, encouraging investment in people
and their knowledge base” – First Link.

Although not industry specific, the legislation pertaining to skills development is considered to
have an overall positive impact on the performance of organisations and hence the sector in
the long-term.

1.4.2.2    Economic factors

Economic trends
The insurance sector is emerging from a period of negative growth and a general global
slump – the 9/11 attacks in New York in 2001 hit the sector at a low point and it has taken 2
to 3 years to emerge from this slump. In South Africa the 9/11 events are no longer
considered to be an issue for the sector.

Economic trends in the Short-Term sector
The Short-Term sub-sector has recently experienced a turn around with growth in premiums
and improved underwriting results being recorded in 2002 and 2003. However, in spite of
this the sector is still hampered economically due to:

•   Poor investment returns – although as of recently this appears to be improving;
•   Increasing reinsurance rates;
•   Increasing competition between brokers and direct distribution channels; and
•   Increasing legislation leading to increased direct compliance costs.

Economic trends in the Long -Term sector
In contrast the Long-Term sub -sector experienced a decrease in premiums in 2003. This is
largely attributed to:
                                                                                            Page 18




•      Increasing competition from banks and other forms of investment initiatives (off-shore
       companies, etc.);
•      Increasing competition for consumer’s disposable income;
•      Poor investment return – although recent improvements in the equity markets and lower
       interest rates should rekindle support for the long-term sector; and
•      Erosion of the capital base due to losses in investments (lower CAR or Capital Adequacy
       Ratios).

Economic trends in the reinsurance sector
The reinsurance sub-sector is emerging from a serious loss-making environment in 2001,
with very few companies posting underwriting profits in 2002. However, hardening of rates
and a focus on cost reduction in 2003 has lead to an improvement in performance in this
sector. High quality staff (with particular reference to underwriters) is key to the survival and
performance of this sector. However, this high reliance on intellectual capital does put these
companies at risk to rogue employees.

Black economic empowerment and transformation
Black Economic Empowerment (BEE) and the recently implemented Financial Sector
Charter (FSC) is one of the two key factors (the other being the FAIS Act) influencing the
insurance sector at present (as identified through CEO, association and organisational
interviews and questionnaires). A summary of the Charter targets has been attached as an
Annexure to this report.

The Charter calls for specific black and black female representation at all management levels
in the insurance sector by 2008, which is over and above specific targets for Board
representation, ownership, procurement targets, servicing the needs of the lower LSM
groupings, etc. The Charter also calls for minimum spends on training and skills development
as well as industry specific learnership targets.

CEOs of large companies interviewed believe that meeting the FSC targets will probably be
their biggest challenge over the coming years. It is recognised that the need to develop
black employees into all levels of the organisation is a business imperative.

The insurance sector proposes to respond to the Charter in the following ways:

Table 1.3: Sector response to the Financial Sector Charter
    Factor                                                                            % Respondents
    I/We do not know about the FSC                                                          6%
    Our company already complies with the FSC                                               9%
    Our company has adequate existing systems in place to deal with the FSC                 30%
    We have/will implement specific training programmes to upskill black staff – to         23%
    take up management positions
                                                                                         Page 19




 Factor                                                                            % Respondents
 We will seek black representation on our Board of Directors                             22%
 We will have to seek black shareholders                                                 16%
 We have/will implement specific retention strategies and succession planning to         6%
 hold onto current staff
 We will have to allocate additi onal funds towards skills development and               5%
 learnerships
 We have/will implement specific recruitment programmes aimed at employing               3%
 suitably qualified black staff
S ource: INSETA sector research

From our research and interviews we have determined that there are very few black
independent brokers or brokerages in South Africa. Independent brokers/brokerages have
commented that the operating environment is particularly tough at present (with particular
reference to FAIS legislation) but even more so for black brokers. This is largely attributed to
the market for insurance products being largely the traditional white market thus making it
difficult for a black broker to break into this market. Numerous organisations and individuals
operating in the sector have identified the need for more black brokers – to sell to emerging
black markets as well as the traditional white markets.

Economic market forces shaping the industry
There are a number of market forces (economic, social and technological) that are shaping
the industry. Some of these are considered to have an overall positive impact on the sector,
whilst others are considered to be negative. Although a significant number of market forces
were mentioned or highlighted during the course of our research, only those with significant
positive or negative impacts have been listed below.

Positive economic factors identified by industry stakeholders include:

    1. FAIS (discussed above under legislative issues);
    2. Low interest rates – leading to increased disposable income and hence additional
       funds to spend on insurance products; and
    3. Emerging markets – expanding the size of the market and increasing the range of
       products to sell to these new markets.

Economic factors identified by industry stakeholders as having a negative impact on the
industry include:

    1. General legislative burden – increasing legislation is increasing time spent on
       adherence and hence direct costs are increased;
    2. Competition – increasing competition from global and local companies for the same
       market. The traditional market in South Africa is considered to be mature and
       sophisticated. Therefore growth in sales in this market is largely as a result of
                                                                                        Page 20



          “stealing” market share as opposed to growth in the market – this is frequently
          referred to as “customer churn”;
    3.    Market volatility – poor investor returns in recent years as a direct result of equity
          market volatility has led to decreasing consumer confidence in the sector and hence
          investment;
    4.    Rand volatility – making the operating environment difficult to predict and manage
          and eventually leading to poor business performance;
    5.    Disintermediation – insurance companies (with particular reference to the short-term
          sub-sector) that are bypassing the traditional broker network and selling directly to the
          consumer. In addition “bankassurance” and retailers selling insurance and financial
          products directly to the consumer is also leading to the bypassing of traditional
          brokers.     Overall, this is considered to be negative for the intermediary/broker
          companies but positive for the insurance companies; and
    6.    Cost pressures placed on organisations – rising organisational costs and increasing
          demand for lower premiums.

Research conducted for this SSP indicates that large insurance companies are all following
similar strategies to overcome negative market forces and to restore investor confidence in
the sector. These strategies include one or more of the following approaches (all of which
have direct implications for skills development):

•   Sales force expansion (which has FAIS and hence skills development implications);
•   Increase and improvements in client focus, including after sales service and
    communication;
•   Creation of products that give investors certainty and lifestyle solutions;
•   Performance monitoring of asset managers to ensure good investor returns; and
•   Focus on relationships with banks (bankassurance) to sell more products.

1.4.2.3      Social issues

The South African market is characterised by ten Living Standard Measurement (LSM)
groups – which converge racial groups according to income and social status. The
“emerging market” referred to by the insurance sector refers largely to South Africans
categorised as LSM 1 to 5. This market in general does not have disposable income to
spend on the current range of insurance products available – other than funeral insurance.
In general this market is underserviced and the consumer is largely unsophisticated. The
FSC, however, prescribes insurance companies to provide access to life assurance
(including mortgage cover), c  ollective investment products and services and short-term risk
insurance products for LSM’s 1 to 5. Specific targets have been or are currently being
negotiated for the sector to address the needs of the emerging market.

Although viewed as an opportunity to expand the existing, saturated market the sector, in
general, is apprehensive and unsure as how best to tackle this challenge. The need to
                                                                                    Page 21



understand this sector and then develop products, services and selling channels to meet the
market needs has been highlighted by the sector.

HIV/Aids is a social factor (in addition to an economic factor) that has and will continue to
impact on the insurance sector. The impact will be felt from three different perspectives, viz:

•   HIV/Aids will lead to increased costs in the sector as the number of infected and affected
    employees in the sector rises. Three large insurance companies undertook anonymous
    HIV testing amongst employees. The prevalence rate in the three companies ranged
    between 3,3% and 5%;
•   HIV/Aids related claims will impact on the financial performance of the sector (as
    identified above in the economic factors influencing change); and
•   Increased HIV/Aids insurance claims will result in increased insurance premiums for all
    customers and hence result in reduced levels of disposable income for all South Africans,
    which in turn may reduce the amount of money customers have to spend in the insurance
    sector.

The insurance sector is characterised by having a very low percentage of union
representation. This is considered to be both a strength and a weakness by industry players.

Social market forces shaping the industry
Positive social factors identified by industry stakeholders include:

    1. Emerging markets – expanding the size of the market and increasing the range of
       products to sell to these new markets. However, although a potential opportunity to
       grow the market the sector is still unsure of how to access these markets; and
    2. Changing customer needs – as customers evolve and gain more knowledge about
       the insurance sector so the need for new and more complicated products becomes
       necessary to meet their particular needs.

Social factors identified by industry stakeholders as having a negative impact on the industry
include:

    1. Client fraud – increasing incidents of fraud lead to increased costs for the company
       hence negatively impacting on overall performance;
    2. High crime levels in South Africa – leading to increased insurance claims with
       subsequent increase in premiums to cover costs. Overall this has a negative impact
       on the insurance sector;
    3. High unemployment in South Africa – leading to high numbers of people with no
       disposable income to spend on insurance products and a limited market in which to
       sell insurance products. With limited growth in the formal employment there is limited
       growth in the pension/provident fund investment market. High retrenchments lead to
                                                                                    Page 22



      an increase in pension and insurance payouts thus negatively impacting on the
      sector’s investment base;
   4. HIV/Aids and general disease burden – impacting negatively on the life and medical
      insurance sectors through increased payouts and thus increasing the overall cost of
      insurance and putting the products more and more out of reach of the average South
      African. In general the sector believes that the HIV/Aids has largely been mitigated
      through the adaptation of products;
   5. Skills shortages – difficulties in finding new entrants into the sector with the required
      minimum skills as well as shortages in existing employees to meet the changing
      needs of the sector. Increasingly complex products introduced to meet changing
      client needs require highly skilled employees to administer, market and sell; and
   6. Brain drain – loss of highly skilled employees to the global employment market.

1.4.2.4    Technological issues

The insurance sector is dependent on technology for competitive advantage purposes. Thus
the use of technology is largely driven by the formal sector. Technology is used for remote
electronic trading purposes, digitisation of financial assets, call-centres (frequently used in
application and claims processes), on -line insurance servicing, virtual selling and
administration of insurance.

Although reliant on technology to drive the sector forward, intermediaries or brokers
frequently operate without computers. Some 49.4% of external intermediaries operate
without a computer (although many rely on computerised market analyst tools).

Positive technological factors identified by industry stakeholders include:

   1. E-technology – the use of technology to provide v  irtual selling opportunities and to
      reduce the cost of administration. Overall leading to improved competitiveness and
      productivity.

Technological factors identified by industry stakeholders as having a negative impact on the
industry include:

   1. Skills shortages – difficulties in finding new entrants into the sector with the required
      minimum skills as well as shortages in existing employees to meet the changing
      needs of the sector. Increasingly complex products introduced to meet changing
      client needs require highly skilled employees to administer, market and sell; and
   2. Shrinkage in employee numbers – in particular the Collective Investments sub-sector
      of the insurance industry is experiencing a reduction in employee numbers (although
      economically the sector is growing) as technological advancements allow for faster
      processing and administration thereby reducing the demand for human resources.
                                                                                    Page 23



1.4.2.5       Environmental issues

Due to the fact that the insurance sector is not often associated with environmental concerns,
environmental factors were not raised as influencers of change in the sector. However,
internationally we are aware that global warming and hence climatic changes could result in
an increasing number of natural catastrophes which in turn could impact negatively on the
insurance industry from a claims perspective – similarly the South African insurance industry
could also be negatively affected by natural/environmental catastrophes.

1.4.3 Changes in the labour market

The insurance sector, driven by legislation, technological advancements, customer
sophistication and the need to improve efficiencies, over recent years has moved to
employing people with higher skills levels. In some industry sub -sectors (viz asset
management) the minimum entry requirement for all employees is a Bachelors degree. In
general, a matric qualification is considered to be the minimum entry requirement for the
sector (coupled with extensive in-house training and skills development).



1.5       Non-Sector specific issues

1.5.1     Issues affecting the broader environment in which insurance operates

A number of non-industry specific issues which impact on the insurance sector have been
identified in the factors influencing change above viz globalisation, macro -economic
environment, etc.

1.5.2     Provincial and National initiatives

In compiling this SSP, INSETA consulted with provincial Departments of Labour (where
possible) to ensure that this skills plan for the insurance sector is congruent with relevant
Provincial Skills Plans. The insuran ce sector related skills needs identified by the provinces
include, inter alia:

•   Gauteng – acknowledges that the financial sector accounts for a quarter of the province’s
    GDP and is looking to attract insurance companies to the province and therefore requires
    an appropriately skilled workforce to attract such companies;
•   Eastern Cape, Free State, Mpumalanga, North West – no skills priorities for the
    insurance or related sectors;
•   KwaZulu-Natal – with particular reference to the financial sector, this province is looking
    to provide project specific low-level financial skills. This may have a bearing on INSETA’s
    initiatives;
                                                                                    Page 24



•   Western Cape – rely on the formal sector to provide financial and insurance related skills;
    and
•   Northern Cape – require basic financial skills.

In addition to Provincial Skills Plans, the Growth and Development Summit agreement has
significant repercussions for the insurance sector (and this SSP), viz:

•   Promotion of small enterprises, in particular black-owned businesses;
•   Linkages between large formal businesses and black-owned SMMEs;
•   Provide access to capital for the start-up of black-owned SMMEs;
•   Commitment to Corporate Social Investment initiatives that make available skills and
    expertise for the Expanded Public Works Programme and Public Investment Initiatives;
•   Improving access to physical, commercial and professional infrastructure by establishing
    business, co -operative and labour support nodes;
•   Assisting in the formation of co-operative banks to address the lack of access to financial
    services;
•   Initiation of measures to avoid retrenchments or minimise the number of persons
    retrenched;
•   Increasing contractual savings through the extension of pension/provident funds to more
    employees;
•   Insurance industry to work towards investing 5% of their investable income in appropriate
    financial instruments (investment in productive assets and services);
•   Capacity building of employee representatives on Boards of Trustees – to enhance their
    decision making skills;
•   To strengthen SETA boards – to enhance decision-making skills..



1.6     Conclusion

1.6.1   Factors influencing the sector profile

There are numerous factors, which are influencing the profile of the insurance sector at
present, however, none so much as the FAIS Act and Financial Sector Charter. These 2
factors are the key issues driving change and keeping CEOs awake at night. One is a
legislative factor imposed on the sector, the other being an industry-imposed factor aimed at
redressing the slow transformation of the sector.

The factors influen cing the sector profile include:

•   Employment equity – historically the insurance sector has been a white, male and
    female dominated sector
•   Management and ownership – management positions in the insurance sector are
    largely held by white males
                                                                                      Page 25



•   Female dominance – the insurance industry, unlike most industry sectors, employs
    more females than males. However, most of these females are in clerical/administrative
    positions
•   Organisation size – the insurance sector is dominated by a few large and super-large
    organisations
•   Distribution – all of the large and super-large insurance sector organisations have
    extensive head office structures, which are largely based in Gauteng or the Western
    Cape. Although branches of these large and super-large organisations and independent
    intermediaries are located all over South Africa, the majority of the sectors employees are
    located in the major city centres



1.6.2   Implications for the SSP

This SSP is thus guided by the following (in addition to the specific skills needs of th e sector
identified in later chapters):

•   FAIS Act
•   Financial Services Charter
•   National Skills Development Strategy
•   Growth and Development Summit
                                                                                     Page 26




Chapter 2: Demand for Skills in the Insurance Sector




Chapter Objective
Based on Chapter 1, this chapter must provide information on the demand for skills in the
sector as well as the issues affecting demand for specific skills.



2.1      Current Employment

2.1.1 The educational and skills profile of the workforce

The insurance sector requires a high level of technical skills and in general the workforce in
the sector consists mainly of highly skilled or skilled employees. There are very few unskilled
employees in the sector. This trend is clearly depicted in the distribution of employees by
occupational category (refer to Section 1) – the bulk of employees in the sector fall within the
following occupational categories:

•     Owners, senior officials / managers;
•     Middle / junior management
•     Professional
•     Technical
•     Clerical and administrative workers
•     Sales and service workers.

There are very few employees within operative or low skill occupational categories such as
labourers, machine operators, craft workers, etc.

Clerical/ administrative and sales/service workers
The majority of employees in the sector fall within the clerical/administrative and
sales/service worker occupational categories. Although many of these employees may not
have a currently recognised tertiary qualification (NQF 5 or more) those that are employed in
the formal sector would more than likely have participated in in -house, insurance industry
specific training and development programmes. Due to the nature of their jobs we assume
that the majority of employees in these occupational categories hold a matric certificate (NQF
level 4) – this was corroborated through industry consultation to inform this SSP.

Professionals
Professionals operating in the insurance sector are, in general, highly qualified. Typical
occupational categories that fall within the professional category include, inter alia:

•     Actuaries
•     Doctors
•     Nurses
•     Pharmacists
•     Lawyers
•     Accountants
•     Business analysts
                                                                                    Page 27



•     Asset managers
•     Risk managers
•     Underwriters and assessors
•     Consultants
•     Human resource practitioners
•     Information technology specialists, etc

Most professionals operating in the insurance sector have formal tertiary qualifications
(although, in general these are not specific to the insurance industry), including inter alia:

•     Commerce degrees
•     CA (SA)
•     Actuarial degrees
•     Legal qualifications
•     Medical degrees, etc

Management
The insurance sector is dominated by white males in management positions and according
to CEOs interviewed as part of this SSP, many of these managers do not have any formal or
industry specific qualifications – they have achieved their positions through experience.
Many CEOs commented that this lack of qualifications at management level sets a poor
example for entrenching skills development and minimum skills requirements for
management trainees (in particular potential black managers). Overall, there is an absence
of role models in the sector which young black management trainees can look up to. In
addition, the low attrition rate of white staff members in executive/management positions is a
major cause of employment equity blockages – preventing skilled black managers from
entering these positions.

Intermediaries/brokers/financial advisors
Independent intermediaries/brokers have varying educational profiles (from degrees/NQF 8
to a Grade 10/NQF 2 or equivalent). The majority of all financial intermediaries/ brokers
have a qualification equivalent to a Grade 12/ matric/ NQF 5. Some intermediaries have
industry specific qualifications.
According to research conducted by Grant Thornton for INSETA’s FAIS project, the
approximate qualification profile of internal (employees of insurance companies, excluding
brokerages) and external (independent brokers or employees of brokerages) intermediaries/
brokers is as follows:

Table 2.1: Qualification profile of internal and external intermediaries
 Qualification                                  Internal          External
    Grade 10 or NQF 2                             1%                 11%
    Grade 11 or NQF 4                             4%                 2%
    Grade 12 or NQF 5                             85%                56%
    NQF 6                                         7%                 3%
    NQF 7                                         1%                 1%
    NQF 8                                         1%                 0%
    Other                                         0%                 2%
    Unknown                                       1%                 25%
Please note that the figures provided for external may still not be an accurate reflection, due
to the fact that even though data was submitted, qualifications for 25% of those external
advisors were unknown.
Source: Grant Thornton research
                                                                                    Page 28




However, typically intermediaries/brokers enter the sector with limited formal qualifications.
After having attending an in-house training programme offered by a large insurance company
(which in general is not registered on the NQF nor is it outcomes based) these individuals
are able sell insurance products and services. Intermediary / brokering careers are
frequently viewed as an option for retrenched or unskilled people1.

However, with the advent of the FAIS Act this situation has changed. Financial
intermediaries are now required, through legislation, to obtain a minimum qualification (within
a specified timeframe) in order to sell specific types of insurance products and services. In
many cases these independent financial intermediaries/brokers are forced to deal with
meeting the minimum legislative requirements on their own as they do not have the support
of a large company to guide and support them in obtaining the necessary qualifications.

The objective of the Act being to upskill and upgrade the quality of service offered by
financial intermediaries and to remove the stigma surrounding the career and the advice
offered by these intermediaries.

Funeral brokers/intermediaries
Most intermediaries or brokers operating in the funeral sector do not have the required skills
to meet the Fit and Proper requirements of the FAIS Act2. The overall skill and qualification
level is considered to be extremely low – in some cases the need for ABET training is
required before any industry specific training can be provided.

Attractiveness of the sector
CEOs and others operating in the insurance sector do not believe that the sector is
considered to be an attractive career choice for school leavers – largely due to the overall
negative consumer perception of the sector coupled with the lack of knowledge of available
careers in the sector

2.1.2 Factors impacting on the skills needs of existing employees

Based on our research findings the following factors were identified by industry
representatives (reported by 50% or more of respondents) as having a an impact on the
need for skills development of existing employees:

•      FAIS Act – requiring all financial intermediaries to comply with the Fit and Proper
       regulations. This has significant implications for many organisations operating in the
       sector as they strive towards ensuring that all relevant employees obtain the required
       qualifica tion to meet the FAIS Act requirements.
•      Financial Sector Charter – identification of the need to upskill and develop black
       employees into operational and managerial positions in the sector
•      Skills Development Act – requiring employers to upskill existing employees
•      General legislative burden (red tape) – the need for employees to keep abreast of
       legislative requirements and changes
•      Cost pressures – rising organisational costs and increasing demand for lower premiums
       enforcing employees to be skilled in managing costs within the organisation

1   Source: discussion groups with insurance intermediaries
2   Interview with large funeral insurance company
                                                                                   Page 29




•     Changing customer needs – the need for employees to develop and understand new age
      insurance products
•     Advancements in e-technology – requiring employees to be skilled to apply these
      technological advancements in the workplace
•     Skills shortages of existing employees to meet the changing needs of consumers and the
      sector
•     Brain drain – requiring employers to upskill existing employees to meet the skills gap
      emerging through skills being exported out of the country
•     High unemployment rates in South Africa – requiring existing employees to understand
      the implications of cashing in on pension/provident funds
•     HIV/Aids – the need for employees to understand the implications of the pandemic on the
      company and the sector.

2.1.3 Projecte d future skills requirements of existing employees

During our research it was determined (through CEO interviews) that the sector is looking
more and more towards higher qualified and skilled employees. The concept of continuous
professional development (CPD) for key employees was highlighted as a business
imperative. This is attributed to the continually changing operating environment and the
need to keep, at minimum, abreast of local and global competitors.

The reinsurance and asset management sub-sectors indicated that they would in future only
be looking to recruit graduates for the majority of occupational categories in their
organisation. In fact, in some companies existing employees without at least an NQF 7
qualification are encouraged to obtain a relevant qualification within a specified timeframe.
The need for highly skilled and specialised human resources was highlighted as the reason
for this minimum requirement. The minimum requirement of a degree is in addition to the in -
house training provided to employees.


2.2      Employment Trends and Patterns

2.2.1 Sector wide employment demand

Of the 100+ companies included in our research to inform this SSP no more than 6% are
expecting a decrease in demand for any one specific occupational category. In general, 50%
of companies are expecting demand for most occupational categories to remain unchanged.
According to the CEOs included in our research process, organisations have performed only
moderately and therefore there is still an emphasis on cost cutting, which in some cases
leads to retrenchments but in many cases leads to a reduction in training costs. In addition,
although the sector may be experiencing growth in premiums, improvements in staff
efficiency and technological advancements ultima tely drive employee numbers down and
hence in a growing sector, employees numbers essentially remain unchanged.

34% Of respondent companies are expecting overall employment in their organisation to
increase. However, the extent of this increase in employment is unknown.

2.2.2 Growing occupational categories / skills
                                                                                    Page 30




Occupational categories in which there is expected to be growth in demand (for some
companies) are as follows (taken deaths, retirees, churn, etc into consideration) – as
identified by respondent companies:

Table 2.2: Occupational categories – anticipated increase in demand
 Occupational Category                     % Respondents expecting an increase in
                                           demand
 Clerical / administrative workers         35%
 Learners                                  29%
 Service and sales workers                 28%
 Professionals                             26%
 Middle and junior management              25%
 Senior officials and managers             20%
 Technicians         and        associated 18%
 professionals

Demand for learners is largely been driven by the Financial Sector Charter, which requires
participating companies to take on black matriculants as learners over a 3-year period. The
total number of learners in this period is to be equivalent to 4,5% of the organisation’s
workforce. However, in spite of the FSC learnership targets, CEOs are, in general, of the
opinion that the sector would not be able to absorb all these learners at the end of the 3-year
period – largely due to slow sector growth and technological advancements which reduces
the number of required employees.

As identified in Section 1 some of these intermediaries/brokers may well opt out of meeting
the FAIS Act fit and proper requirements and therefore opt out of the sector. Thus the
demand for qualified financial intermediaries/brokers should increase as a gap in the market
becomes available. In addition, in order to me et the needs of a growing sector (large
insurance companies are putting a lot of emphasis on increasing sales – see Section 1) as
well as to service the needs of the emerging sector (as identified in the FSC), the expected
demand for appropriately qualified intermediaries/brokers is expected to increase even
further.

2.2.3 Declining occupational categories / skills

Based on the research process followed to inform this SSP, there are no significant
occupational categories or skills in the insurance sector, which are expected to decline in
numbers.

The Collective Investments sub-sector has mentioned that due to technological
advancements, the number of asset managers required to administer assets and funds has
in fact decreased over recent years. However, due to recent increases in demand for
services from this sub-sector additional decreases in demand for asset managers are no
longer anticipated.


2.3    Conclusion

2.3.1 Implications for the SSP

In order to keep abreast with local and global competitors (and the advancing and changing
operating environment) the insurance sector requires employees with high -level skills – and
the level of skills required is increasing. In addition to this the FAIS Act and FSC is putting
                                                                                Page 31



                                         o
additional pressure on these companies t ensure that they develop financial advisors to
meet the minimum legislative requirements as well as to ensure that a large enough pool of
black employees are developed not only into all levels of management but also in the
organisation as a whole.

The need for qualified independent intermediaries/brokers to meet the needs of the
anticipated growing sector as well as the FAIS Act Fit and Proper requirements also has
significant implications for this SSP.

Overall, most occupational categories in the sector are anticipated to experience some
growth in demand over the next 5 -years.
                                                                                     Page 32




Chapter 3: Supply of Skills in the Insurance Sector




Chapter Objective
This chapter deals with the stocks of skills and qualifications in the sector and the flows of
skills and qualifications in the education and training system



3.1    Stocks of Skills and Qualifications

3.1.1 Stocks of insurance sector skills in the labour market

The majority of occupational categories in the insurance sector (underwriting, claims
assessment, loss adjustment, etc.) are not linked to any specific entry qualification i.e. these
qualifications cannot be obtained via attendance at an FET/HET institution. However, there
are some qualifications such as actuarial science, which are considered to be professional
and specific to the insurance sector which at present can only be obtained through an FET
institution.

In general the skills base in the sector has largely been driven non-institutionally – where the
calibre and competence of the industry has been driven by large employers and a few
industry bodies. Skills, as opposed to qualifications, have been developed through
experiential learning and built incrementally through years of experience.


3.1.2 Adequacy of the current skills stock in the labour market

Specific human resource development challenges identified by sector respondents include:

Table 3.1: Insurance sector Human Resource development challenges
 HRD Challenge                                                         %             Respondents
                                                                       experiencing the challenge
 Generally unable to find the requisite skills /shortage of skilled 40%
 people
 Difficulty in fulfilling equity targets / difficulty in finding 39%
 appropriately skilled black staff
 High training costs                                                    28%
 Difficult to find training providers capable of providing insurance 25%
 sector specific training and skills programmes
 High turnover of qualified / skilled black staff                       16%
 Shortage of insurance specific training programmes / skills 13%
 programmes
 Unable to retain the requisite skills i.e. high attrition and turnover 4%
 rates of staff
Source: INSETA sector research


3.2    Flow of Skills and Qualifications
                                                                                          Page 33



3.2.1 Introduction

Flow of skills from the schooling system

The previous educational system, and to some extent the existing one, does not adequately
address or encourage insurance as being a career of choice. Thus demand for employment
in the sector from genuinely interested matriculants is considered to be limited. However,
due to high levels of unemployment in South Africa sourcing matriculants for the sector is not
considered to be an issue. In addition, as indicated in Chapter 2, some insurance sector
companies indicated that they are, or will be in the future, only looking to recruit graduates for
the majority of occupational categories in their organisation – thus decreasing the already
limited employment opportunities for matriculants in the insurance sector.

Inspite of there being sufficient supply of matriculants (interested or uninterested in the
sector) it is generally perceived 3 that the level of numeracy and English literacy evident in the
majority of school leavers is not at levels required by the sector. Therefore the employment
of matriculants in general requires the bolstering of numeracy, analytical and literacy skills.

According to the FPI, the effect of the lack of financial literacy training at school is two -fold:

•     A consumer base with poor or little financial literacy; and
•     A lack of appreciation or understanding for the insurance sector resulting in it not being
      viewed as a career of choice.

This points to a need for some type of financial training at school.

3.2.2 Flow of skills / qualifications from the FET/HET system

Public training providers for the insurance sector comprise tertiary institutions such as
universities and technikons which offer educational or qualification opportunities to learners
(employees or new recruits). The majority of qualifications offered by public institutions are
not insurance specific – there is a significant overlap with finance and other industry sectors.

Around 18 public institutions are registered with INSQA (all via Memoranda of Understanding
with other ETQAs) – of which 4 are universities. A list of these institutions is included as an
Annexure to this report.

Many of these institutions are not offering insurance -specific qualifications – rather generic
business and financial courses are offered. Some institutions are offering learnerships, with
these learnerships being conducted in association with INSETA.

Actuarial qualifications are, in particular, specific to the insurance sector (although not
exclusively). At the moment, actuaries qualify at a rate of 40 people per year, with 550
qualified actuaries in existence in South Africa. According to the Actuarial Society of South
Africa, South Africa should have sufficient actuaries (where supply equals demand) in the
next 5 to 10 years. According to statistics from two universities that offer actuarial
qualifications, qualified actuaries are currently predominantly men, with a high proportion of
whites. The demographic profile of current actuarial learners is as follows:

Table 3.2: Estimated racial and gender breakdown of actuarial learners
 % of Total              African           Coloured              Indian                     Total
                                                                          White
                           4%                 1%                 4%       16%               26%
    Female
    Male                  12%                 1%                 20%      41%               74%

3   CEO and stakeholder interviews
                                                                                                 Page 34



    Total                 16%                  3%                 25%                 57%         100%
Source: University of the Witwatersrand and University of Cape Town

Thus the issue is not whether there will be enough qualified actuaries in years to come, but
rather will there be enough qualified actuaries of colour.

3.2.3 Flow of skills / qualifications from professional body or industry association
      training provision

There are two primary professional body/industry association training providers in the sector,
viz the Financial Planning Institute (FPI) and the Insurance Institute of South Africa (IISA).

The FPI is a professional, standard setting body that provides training and is authorised to
issue Certified Financial Planner licences to its professionally qualified members. The
University of the Free State, through its Centre for Financial Planning Law, and in partnership
with the FPI, offers two levels of qualifications namely:

•     The Post-graduate Diploma in Financial Planning
•     The Advanced Post-graduate Diploma in Financial Planning

The FPI has some 3 000 certified financial planners, as members, in South Africa that have
completed the post-graduate diploma in financial planning, with some 1 200 people currently
studying towards it.

From January 2005, the following institutes’ curricula have been accredited by the FPI:

Table 3.3: Institutes accredited with the FPI
 University                                  Qualification
 University of Stellenbosch                  Advanced Diploma in Financial Planning
 University of Port Elizabeth                BComm Financial Planning
 University of the Free State                BComm Financial Planning
 Rand Afrikaans Uni versity                  BComm Finance specialising in Financial Planning
Source: FPI

A curriculum for BComm Financial Planning at the University of Natal is currently being
accredited by the FPI (to be offered from January 2005).

The IISA is an industry training provider and is registered as a private higher education
institution. A number of qualifications (in a stepped approach) can be obtained via the IISA,
viz:

•     Certificate of Proficiency (CoP)
•     Intermediate Certificate in Business Studies (ICiBS)
•     Higher Certifica te in Insurance (HCiI)
•     Advanced Diploma in Insurance Management (ADiIM)

Entry requirements for the foundational (CoP) qualification are not stringent.

The following table provides the number of people that obtained IISA qualifications in March
2003, September 2003 and March 2004:

Table 3.4: IISA qualifiers – March 2003 to March 2004
                                                               Number of Qualifiers
                                      March 2003                 September 2003             March 2004
                                  Page 35




 CoP           1 346   1 245   1 290
 ICiBS          99     152      93
 HCiI           43      39      13
 Diploma in     10      13      3
 Insurance
 ADiIM           2       2       6
 Total         1 500   1 451   1 405
Source: IISA
                                                                                      Page 36



3.2.4 Flow of skills / qualifications from private training provision

There are very few private training providers in the insurance sector that provide training
specifically for the insurance sector. In general this category of trainers is comprised of
private consultants with trainers exhibiting previous industry work experience or specialised
product knowledge. To date approximately 7 private providers have been accredited with
INSQA.

In general these private providers facilitate in-house training for companies (i.e. they may
replace some or all of the typical roles carried out by in-house training departments).

3.2.5 Flow of skills / qualifications from in -house training provision

The insurance sector is reliant on in -house training provision to upskill existing employees.
The majority of large employers are well-entrenched in people development principles and
most provide extensive in-house training for employees. The majority of industry specific
training is provided by in-house training departments (coupled with private providers in some
cases).

The types of industry specific training conducted in–house include product knowledge, selling
skills, management development, customer service skills, technology skills, etc.

Most super-large and large employers in the sector have initiated in-house corporate
universities, centres of training excellence or training institutes. Some of these interventions
are cascaded to intermediaries/brokers, etc but the majority are tailored for the organisation’s
employees.

In general independent intermediaries and brokers in the sector rely on training services
provided by large companies as the sole source of training they receive. However, in light of
the FAIS legislation this has and will continue to change as intermediaries/brokers seek
external providers to assist them in meeting the FAIS minimum requirements (in general
these are not provided by in-house training institutes).

Although the sector has identified the need to develop b lack employees, planned training
initiatives for existing employees (as calculated from WSPs) are very much inline with the
current racial and gender split of the sector – there appears to be little additional emphasis
on developing black employees. In fact, the sector that is benefiting the most from in-house
training is white females – with 29% of the sector receiving 33% of the planned training
initiatives. This training is mainly at the detriment of white males. The remaining racial
groups are anticipated to receive training inline with the current employee profile.
                                                                                                             Page 37




Graph 3.1: In-house training provision – by race and gender




                                                                           African Male
                                          11%                              African Female
          33%                                             14%              Coloured Male
                                                                           Coloured Female
                                                                           Indian Male
                                                                6%
                                                                           Indian Female
                 17%                          4%          10%              White Male
                                    5%
                                                                           White Female




S ource: INSETA 2003 WSPs

In-house training provision in the sector is largely aimed at clerical and sale s/service workers
with these 2 occupational categories being recipients of some 70% of all in -house training
initiatives (these occupational categories account for 60% of employees in the sector).

Junior, middle and senior management are the recipients of only 9% of in -house training
initiatives – these occupational categories account for 8% of the workforce. Therefore in
spite of the need to develop management and leadership skills (in particular for black
managers) there appears to be little additional emphasis on in -house development of these
skills.

Graph 3.2: In-house training provision – by occupational category
                                                                                  Section 18 (2) learners (learnerships for
                                         0%                                       employed learners)

                                         0%                                       Section 18 (1) learners (learnerships for
                                                                                  unemployed learners)
                                         0%
                                                                                  Labourers/ Elementary Workers
                                          2%
                                               4%     5%                          Temporary/ Additional/ Contract workers
                                                            5%

         46%                                                         15%          Senior officials and Managers / owner
                                                                                  managers
                                                                                  Middle to Junior Management


                                                                                  Professionals
                                                    23%
                                                                                  Technicians and Associated Professionals


                                                                                  Service and Sales workers


                                                                                  Clerical / administrative workers




S ource: INSETA 2003 WSPs
                                                                                                   Page 38



Although clerical and sales/service workers will be receiving the bulk of the in -house training
initiatives, they will not be receiving the proportionate in -house training spend. Professionals
and technical employees will be the recipients of more than their proportionate share of in -
house training expenditure. This is largely due to the sp ecific technical requirements of
these occupational categories which are significantly more costly i.e. computers, software,
high -level technical trainers, etc.


Graph 3.3: In-house training spend – occupational category

                                       0%
                                                                        Labourers/ Elementary Workers
                                        0%
                                                                        Skilled/Craft & Related Trade Workers
                                        0%
                                         0%                             Section 18 (1) learners

                                           1%                           ABET
                                              4%      5%
                                                             6%         Section 18 (2) learners
  32%
                                                                   8% Temporary/ Additional/ Contract
                                                                        workers
                                                                        Middle to Junior Management

                                                                        Senior officials and Managers / owner
                                                                        managers
                                                                        Professionals
                                                             22%
                22%
                                                                        Technicians and Associated
                                                                        Professionals
                                                                        Clerical / administrative workers

                                                                        Service and Sales workers Internal




S ource: INSETA 2003 WSPs

Planned training initiatives offered by employers tend to focus on technical and sales and
marketing initiatives – with more than 16 000 employees benefitting from such training
initiatives.

Approximately 1 500 people will benefit from management and/or leadership training –
approximately 1/3 of the existing senior and middle managers in the sector.
                                                                                                                                                      Page 39




Graph 3.4: Number of in-house training recipients – by skills priority
    Technology driven financial
                                20
              skills

                Technical skills                                                                                 8010

         Selling/Marketing skills                                                                                  8118

             Risk management            61


            Product knowledge                      1016


     Management development                  526

 Legislative compliance training             444
                                                                                                                                   No of Persons to be trained
                    Leadership                     992


        Information technology                      1090

                 Financial skills                    1300

           Customer Care skills                                   2392

              Computer literacy               669

            Company specific
                                               731
           procedures/systems

                Communication                532

                                    0         1000         2000     3000   4000     5000   6000   7000      8000            9000


Source: INSETA 2003 WSPs


ABET Training
Although limited in quantity the sector is planning to provide in-house ABET training (to 395
people comprising 0.5% of the total employees reported in the WSPs). The majority of the
recipients of this training are african males and females.

Graph 3.5: ABET Training – by race and gender




                                                                                                         African Male
                                                                                                         African Female
                                                                                           41%           African Disabled
         36%                                                                                             Coloured Male
                                                                                                         Coloured Female
                                                                                                         Couloured Disabled
                                                                                                         Indian Male
                                                                                                         Indian Female
                                                                                                         Indian Disabled
                                                                                                         White Male
                                                                                                         White Female

                        1% 3%                                                                            White Disabled
                                    2%1% 4%                                 3% 1%
                                                         2%1%      5%




Source: INSETA 2003 WSPs

3.2.6       Flow of skills / qualifications from learnerships
                                                                                           Page 40



The following table provides INSETA’s learnership statistics as of 22 July 2004:

Table 3.5: Number of learnerships – by employed vs unemployed
    Category                                                    Statistics        Percentage
    Total Provisionally Approved Learners                         1172
    • Total Employed Learners (18.1)                              647
                                                                                    55%
    • Total Unemployed Learners (18.2)                            490
    • Total Employed Disabled Learners (18.1)                      6                42%
    • Total Unemployed Disabled Learners                           29               0,5%
        (18.2)
                                                                                    2,5%
Source: INSETA


Table 3.6: Number of learnerships – by race
    Category                                                    Statistics        Percentage
    Racial Breakdown
                                                                  279               24%
    •       African Male
                                                                  345               29%
    •       African Female
                                                                   74               6%
    •       Coloured Male                                          98               8%
    •       Coloured Female                                        39               3%
    •       Indian Male                                            70               5%
    •       Indian Female                                          72               6%
    •       White Male                                            195               17%
    •       White Female
Source: INSETA

In general the insurance industry has been reluctant to take on learnerships, in spite of
learnership grants paid by INSETA and the added tax benefits. This is attributed to:

•     The traditional training mindset of the sector – coupled with related infrastructure, which
      is difficult to adapt to outcomes based education and learnerships;
•     The sector perception that learnerships are costly to implement (with reported costs
      being significantly greater than the subsidies/tax breaks received);
•     The opinion that learnerships are extremely onerous and difficult to implement and
      coordinate – in terms of mentors, assessors, trainers, etc.;
•     The belief that learnerships provide additional skills that are not required by the sector – a
      skills programme would thus suffice;
•     In the absence of a previous training board the insurance companies are used to
      operating independently and within their own in -house strategies and processes.
                                                                                     Page 41



3.2.7 Flow of skills / qualifications from INSETA initiatives

There are three main INSETA initiatives to support and assist the insurance industry to
develop its management cadre:

•     ELDP – The INSETA/GSB Executive Leadership Development Programme (ELDP) has
      been created to provide the South African Insurance industry with skilled and confident
      leaders. In line with the SA Financial Sector Charter, the ELDP aims to fast track senior
      and emerging executives, especially previously disadvantaged individuals, for leadership
      positions in the insurance industry. Annully 25 people have attended ELDP as from
      2003.

•     LAP - The Leadership Advancement Programme (LAP) is intended to fast track the
      development of middle and emerging managers in the insurance industry. There are
      currently 50 people attending LAP annually as from 2003.

•     WIN – The Women in Insurance (WIN) Programme is a Management Development
      Programme, aimed at women in the financial services sector and comprises of academic,
      behavioural, personal development and coaching and mentoring components which will
      equip learners to function in leadership positions within their organisations. The
      programme consists of academic as well as insurance – specific input. There are
      currently 28 women attending the 2004 WIN programme.


3.3      Conclusion

3.3.1 Flexibility of the labour force and training institutions to meet the changing
      needs of the sector

Currently external training institutions have limited capacity to deliver the quantities of
training required by the sector. In-house training initiatives currently make up for this short-
fall. However, in light of the FAIS legislation and the FSC, additional capacity to deliver
training for the insurance sector will be required.

The current labour force is not adequately equipped to meet the needs of the sector, with
particular reference to the limited number of matriculants with the required mathematical and
English literacy skills. Even those emanating from the HET/FET system often need to be
trained to meet the particular needs of the insurance sector.

3.3.2 Implications for the SSP

The current inadequate supply of quality training providers to meet the needs of the sector
would need to be addressed.
                                                                                            Page 42




Chapter 4: Insurance Sector Skills Development Priorities




Chapter Objective
Based on the first 3 chapters, this chapter aims to determine the employment and skills
needs of the sector based on a gap analysis of the supply of and demand for skills.


4.1      Skills Shortages

4.1.1 Identification of hard-to-fill positions

                                                                                    ard
During the research process insurance sector companies were asked to identify h -to-fill
occupational categories i.e. vacancies that remain open for a long period of time. The
percentage companies reporting it difficult to fill a particular occupational category is as
follows:

Table 4.1: Hard-to-fill occupational categories
 Occupational Category                            % Companies identifying this category as hard-to-fill
 Senior Management                                                      15%
 Professional – general                                                  15%
 Marketer                                                                 9%
 Underwriter                                                              8%
 Middle management                                                        8%
 Actuary                                                                  8%
 Risk assessor                                                            7%
 Telemarketers                                                            6%
 Clerical / administrative workers – general                              6%
 Service and sales workers – general                                      6%
 Board of directors                                                       5%
 Junior management                                                        5%
 Claims assessor                                                          5%
 Chartered accountant                                                     5%
 Medical specialist                                                       5%
 Technicians and associated professionals –                               5%
 general
 Learners                                                                 5%
 Specialist computer operators / programmers                              4%
 Legal / paralegal                                                        4%

Source: INSETA research

Comments emanating from the industry consultation process indicate that there is no real
shortage of actuaries at present (as companies typically employ very few of these
specialists). However, there is a definite shortage of qualified black actuaries, in particular
black africans. An analysis of the potential number of actuaries that should graduate from
universities corroborates that there should be sufficient actuaries in the future. However, the
                                                                                         Page 43



potential number of black actuaries that could graduate through the system is still
significantly lower than the profile of South Africa’s demographics (this also applies to female
actuaries).

The two hard to fill positions with the highest industry response are:

•   Senior management viz: CEO, Chief operating officer, Chief financial officer, Chief
    accountant/economist, Managing director, International manager, Group manager, Senior
    manager
•   Professionals – general viz: economist, business analyst, computer programmer,
    systems analyst, trust officer, tax officer or consultant, financial advisor, certified financial
    planner, compliance officer.

From our research we know that these positions require highly qualified individuals with a
high level of technical knowledge. In addition, based on the current employee profile we
know that these hard -to-fill positions are even more difficult to fill when it comes to female or
black professionals and managers.

Skills shortages as identified by CEOs
CEOs included in the research process identified the following skills shortages:

•   Black actuaries
•   Females in management and leadership positions
•   Blacks in management and leadership positions
•   Professional – pricing of unit trusts (with particular reference to skilled black people)
•   Black chartered accountants

Skills shortages as identified by associations/professional bodies
Professional bodies consulted during the research process identified the following skills
shortages in the insurance sector:

•   Black brokers/intermediaries or financial advisors. In general the following were identified
    as barriers to entry for black brokers/intermediaries:
            o Knowledge of the insurance sector
            o Financial knowledge
            o Technology (no access to as well as lack of knowledge on how to use
                technology).
•   Compliance officers (professional)
•   Black managers and leaders

4.1.2   Quantification of skills shortages in the insurance sector

Although skills shortages were identified by the sector, these related in particular to equity
driven skills.

Quantification of the anticipated skills shortage is problematic due a lack of accurate
statistics. However, by applying assumptions to available statistics it is possible to estimate
                                                           e
the anticipated total demand for particular occupational cat gories over the next 5-years. In
addition the estimated supply emanating from various sources can be estimated. The net
supply/demand calculation allows us to quantify the estimated shortfall or excess in skilled
people per identified occupational category.

In undertaken this quantification exercise we have focused on the following occupational
categories:
                                                                                         Page 44



•   Intermediary/broker
•   Senior management
•   Middle management
•   Professional
•   Actuary
•   Underwriter

The results of this calculation are detailed hereunder.

Estimated total number of employees                       108 000

Estimated current number of:
External Brokers                                            52 050
Senior Management                                            4 320
Professionals                                                7 560
Actuaries                                                      454
Middle Management                                            4 320
Underwriters                                                 4 536

Estimated % retiring/leaving the sector in next 5-years
Brokers                                                        20%
Senior Management                                              15%
Professionals                                                  10%
Actuaries                                                      10%
Middle Management                                              10%
Underwriters                                                   10%

Estimated growth in demand
Brokers                                                        5%
Senior Management                                              3%
Professionals                                                  3%
Actuaries                                                      3%
Middle Management                                              3%
Underwriters                                                   3%

Estimated number of new recruits required (5-year period)
Brokers                                                23 423
Senior Management                                        1 296
Professionals                                            1 890
Actuaries                                                  113
Middle Management                                        1 080
Underwriters                                             1 134

Supply of skills (over a 5- INSETA                  In-house     Professional                 Total
year period)                initiatives   FET/HET   Training        bodies    Learnerships   Supply
Brokers                                                             14000                    14 000
Senior Management               125                   600                                      725
Professionals                                                        1350                     1 350
Actuaries                                   200                                                200
Middle Management               250                   600            150                      1 000
Underwriters                                                                      1000        1 000
                                                                                            Page 45



Supply vs Demand
Brokers                                                    -9 423
Senior Management                                            -571
Professionals                                                -540
Actuaries                                                      87
Middle Management                                             -80
Underwriters                                                 -134

The largest skills shortage clearly lies in intermediary/broker occupational category. This
skills shortage is based on the following calculation:

•     If we assume that of the 52 000 external brokers/intermediaries currently operating in the
      sector 20% will retire or not meet the FAIS minimum requirements during the next 3-years
      (in the United Kingdom some 30% of brokers retired or opted out of the profession with
      the advent of similar legislation) then, based on current demand levels there should be a
      gap for some 10 000 new, qualified brokers/intermediaries in the near future (of all race
      groups). In addition, based on the assumption that insurance companies will develop
                                                                                  a
      products and services to sell to LSMs 1 to 5 (as per the FSC) then the tot l shortage of
      appropriately qualified brokers should be greater than 10 000 and as much as 23 000.

It is important to note that many of these potential vacancies may well be filled through the
advancement and development of existing employees.

FSC related skills shortages
It is also important to note that in addition to the potential skills shortage in senior and middle
management levels (and to some extent professional occupations), the need for black people
in these positions to meet the needs of the FSC is a further challenge for the sector. The
general skills shortage in these occupational categories could be fulfilled through addressing
some or all of the FSC equity targets.

According to the FSC the target for black senior managers in 2008 is 25 % of all senior
managers. Assuming that all the companies would be willing to comply with the FSC and
that there are no (there are limited numbers at present) black senior managers at present,
then some 1 000 black senior managers would need to be sourced by 2008. Of these senior
managers at least 170 would need to be females.

In terms of middle management, according to the FSC target some 1 300 black employees
would need to be sourced by 2008 (assuming that all insurance sector companies would
seek to comply with the FSC), of which 430 would need to be female.


4.2       Skills Gaps

4.2.1 Identification of skills gaps in the existing internal labour market

Identified skills gaps of existing insurance sector employees, as reported by questionnaire
respondent companies are as follows:

Table 4.2: Identified skills gaps
 Skills gap
                                                           % Companies identifying this as a skills gap
    Management skills                                                         42%
    Advanced financial skills                                                 42%
    Advanced computer skills                                                  42%
    Customer relations skills                                                 41%
    Compliance skills                                                         41%
                                                                                           Page 46



    Skills gap                                            % Companies identifying this as a skills gap
    Product specific knowledge                                             40%
    Legislation knowledge                                                  39%
    Technical skills                                                       37%
    Leadership skills                                                      37%
    Basic financial skills                                                 34%
    General knowledge of the insurance industry                            34%
    Communication skills                                                   34%
    Marketing skills                                                       32%
    Sales skills                                                           29%
    Basic computer skills                                                  25%
    General work ethics and values                                         24%
    Mathematical skills                                                    21%
    Company specific procedures                                            18%
    Risk management                                                        17%
    Actuarial skills                                                        9%
Source: INSETA research

Additional research undertaken to inform this SSP revealed the following skills gaps:

•      Skills development to meet FAIS Act requirements – this has a strong business focus at
       present
•      Legislation – generally keeping staff up-to-date with legislative changes
•      Underwriting skills – top end skills for the reinsurance sector
•      Managerial and leadership skills
•      Brokers/intermediaries
               o Product training
               o Skills on complex products such as unit trusts, offshore options, property
                  companies, etc
               o Understanding markets
•      General communication and language skills – to deal internally and externally
•      Mathematical literacy
•      Selling
               o Sales force management training
               o Sales process training
               o Sales tracking training
               o Distribution cost analysis
               o Sales negotiation skills
•      Administration
               o Data capturing – workload planning and workflow management
               o People management skills
               o Implications of policy churn
               o Office management skills
•      Customer relationship management
               o Use of statistical analysis for problem solving, identifying new business
                  opportunities, etc
               o Call-centre staff CRM skills
•      Investments
               o Corporate governance
•      Finance
               o AC 133
               o Taxation
•      Information Technology
               o Integration between IT and financial systems, administration, general ledgers,
                  etc
                                                                                    Page 47



•   Risk management
          o Pricing and product design
          o Duties of the public officer
          o Sensitivity and probability analysis
          o Enterprise risk management

4.2.2 Quantification of the skills gaps in the insurance sector

The most significant skills gap in the insurance sector is the need for intermediaries/brokers
to meet the FAIS Fit and Proper minimum requirements. According to these requirements all
intermediaries (excluding Long-term Category A which is almost exclusively confined to
selling of funeral policies) would need to have an NQF level 4 or 5 skills programme or
qualification within 2-years after licensing (the initial licensing deadline for existing
intermediaries is 30 September 2004) – the extent and type of qualification varies according
to the type of insurance product/s and services sold by the intermediary.

Assuming that the 56 000 internal and external intermediaries that currently have a Grade 12
or less qualification would need to be upskilled to obtain the relevant NQF skills programme
or qualification to meet the FAIS requirements, and assuming that 20% would opt out of
obtaining the necessary credits (as per the skills shortages quantification), then some 45 000
intermediaries (16 000 internal and 29 000 external) would need to be trained and upskilled
to meet the immediate FAIS skills gap. Based on the current qualification rate emanating
from the IISA and the FPI, there may well be some 10 000 brokers/intermediaries that will fall
short of the FAIS qualification requirements (see skills shortage quantification above).

Due to a lack of specific statistics it is not possible to calculate the skills gap of existing
employees in large companies. However, based on WSP and ATRs received by INSETA we
know that these companies are largely undertaking extensive in-house training initiatives
(see Section 3). In addition, some of these skills gaps could be addressed through the skills
shortage s quantification.

Further to the known skills gaps, it is believed that there are numerous “runners” in the
funeral insurance industry that have not been quantified in the FAIS intermediary research
conducted by Grant Thornton (estimated at 50 000 “runners”). According to industry
sources these runners would not be able to meet the FAIS NQF level 2 skills programme
requirements before 30 September 2006 – some 50 000 people may need ABET training
before embarking on the required level 2 qualification.
                                                                                     Page 48



4.3    Institutional Constraints

4.3.1 Identification of inappropriate/inflexible curricula to meet skills gaps and
shortages

Other than actuarial studies in-house training bodies, private training providers and public
                                        a
providers that have developed curricul in consultation with the sector, provide most skills
and qualifications relevant to the insurance sector. Thus, in general all curricula specific to
the insurance sector are tailored to meet the needs of the sector.

This approach has largely developed as a result of the FET/HET system not training
appropriately qualified and trained individuals specifically for the insurance sector. In
addition, the current schooling system does not produce the required mathematical and
literacy standards required fo r the sector.

4.3.2 Time lag in the throughput of learners

The FSC requires insurance companies to meet the equity targets by 2008 – in 4 years. In
order to comply insurance sector companies will have to work hard and diligently at
developing senior, middle and junior black managers, including black female managers.
Given that it takes some time to develop people into management/leadership positions, there
is an obvious need to focus on redressing this constraint with urgency.

In addition, the FAIS Act requires all intermediaries/brokers to achieve the required NQF
credits 2 years after licensing (30 September 2006). The upskilling of some 45 000 existing
intermediaries within this timeframe is a daunting target.

The upskilling of the unknown number of funeral sector “runners” (with ABET and other NQF
level 1 and 2 skills) is unlikely (almost impossible) to be achieved in the currently stipulated
2-year period.

4.3.3 Other Constraints

The sector is constrained by a lack of training providers (public and private) that can deliver
the type of quality training required by the sector.

At present intermediaries/brokers don’t know which training provider, if any, to approach to
assist them in meeting the FAIS Fit and Proper skills requirements. With the expected high
demand for FAIS training – from both new recruits and existing intermediaries - the need for
nationally distributed, recognised and accredited quality training providers (that can cope with
the anticipated volume of learners) is required. In some cases large insurance companies
are providing FAIS Fit and Proper training but in general this is for internal intermediaries
only – external intermediaries are being left to fend for themselves. The direct cost and time
constraints required to m   eet the FAIS skills requirements is considered to be extensive for
some intermediaries (in light of the fact that they are, in general, independent consultants
and sales people).


4.4    Conclusion

4.4.1 Implications for the SSP

There is an urgent need for the sector to focus on developing black people into management
and professional occupational categories in order to meet the minimum requirements of the
FSC.
                                                                                        Page 49




In addition, a significant gap in the intermediary/broker/financial advisor occupational
category is predicted as demand for this category outstrips supply in light of the FAIS Fit and
Proper legislation and changing market conditions.



                                           ---ooo0ooo ---


Extract from Draft Sector Skills Plan 2005 -2009
For more information contact INSETA on (011) 544-2000
Visit www.inseta.org.za or email info@inseta.org.za



Abbreviations and Definitions




The following abbreviations and definitions are used throughout the document:

A bbreviations

ABET                         Adult Basic Education and Training
ADiIM                  Advanced Diploma in Insurance Management
ATR                          Annual Training Report
BEE                          Black Economic Empowerment
BoD                          Board of Directors
CA                           Chartered Accountant
CAR                          Capital Adequacy Ratio
CEO                            Chief Executive Officer
CoP                            Certificate of Proficiency
CPD                            Continuous Professional Development
CRM                            Customer Relationship Management
DoL                            Department of Labour
ELDP                           Executive Leadership Development Programme
ETQA                           Education and Training Qualifications Authority
FAIS                           Financial Advisory and Intermediary Services
FET                            Further Education and Training
FPI                            Financial Planning Institute
FSB                            Financial Services Board
FSC                            Financial Sector Charter
GDP                            Gross Domestic Product
GDS                            Growth and Development Summit
GSB                            Graduate School of Business
HCiI                           Higher Certificate in Insurance
HET                            Higher Education and Training
IISA                           Insurance Institute of South Africa
INSETA                         Insurance Sector Education and Training Authority
INSQA                          INSETA Education and Training Qualifications Authority
ICiBS                          Intermediate Certificate in Business Studies
LAP                            Leadership Advancement Programme
LSM                            Living Standard Measurement
NSDS                           National Skills Development Strategy
                                                                                    Page 50



NQF                    National Qualifications Framework
NSF                    National Skills Fund
RPL                    Recognition of Prior Learning
SA                     South Africa
SAQA                   South African Qualifications Authority
SARS                   South African Revenue Service
SETA                   Sector Education and Training Authority
SDF                    Skills Development Facili tator
SIC                    Standard Industrial Classification
SMME                   Small, Medium and Micro Enterprise
SSP                    Sector Skills Plan
Stats SA               Statistics South Africa
WIN                    Women in Insurance
WSP                    Workplace Skills Plan



Definitions

Employed Learner /     A learner registered on a learnership, who is an employee of the
18(1) Learner          employer

Learnerships           A learning programme that leads to qualification registered with
                       SAQA. Learnerships include classroom -based learning at a college
                       or training centre and on-the-job training in a workplace

NQF                    A system based on registered national standards and qualifications,
                       bringing together education, training and life experience into a single
                       framework designed to promote lifelong learning

Skills Programme       A skills programme that is occupationally based; that utilises training
                       providers and when completed, will constitute a credit towards a
                       qualification registered on the NQF

Unemployed Learner /   A learner registered on a learnership who was unemployed before
18(2) Learner          commencing the learnership

				
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