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Bryte EditionJune ’17

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CEO Foreword

Dear Broker Partner,

Reinvigoration and ResilienceWelcome to our first official Bryte Edition. The last quarter was characterised by significant political developments in South Africa, which have resulted in notable shifts in the economic climate of the country; among these being the ratings downgrade to junk status and the country officially falling into a recession as a consequence of the economy retracting for two consecutive quarters. Tough economic times call for resilient businesses that are capable

of navigating turbulent economic conditions.

Inherent to our identity is shining a light on risk, partnering with you and your customers to assess and mitigate potential exposure, particularly during times of uncertainty. As always, we remain firmly committed to being part of the African success story; proactively managing risk through our insights and foresight.

A notable event that called for us to mobilise as one collective team and care for our customers and the wider community came on Tuesday, 6 June, when approximately 10,000 people in Knysna had to be evacuated. The fires destroyed hundreds of homes, bed and breakfast establishments and guest houses and a number of lives were lost. Current reports state that this, being the largest recorded incidence of residential fires in the country’s history, will cost the industry well above R1 billion. To date, we have received in excess of 69 claims amounting to R105 million. We have reinsurance protection in excess of R25 million for these types of losses.

‘Bryte’ OpportunitiesLooking back at the 1998 economic crisis, interest rates rose to 32 percent – despite this, the country prudently navigated itself out of these dire straits and economic conditions improved. There is always light at the end of the tunnel. South African Reserve Bank Governor, Lesetja Kganyago highlighted some positive economic indicators in his mot recent Monetary Policy Committee (MPC) statement, namely lower inflation rates. Further afield, the global growth outlook continues to show resilience with rising global trade volumes. We must, therefore, be reminded that tough economic times present us with opportunities to realign our focus and stay committed to the path we have mapped for ourselves.

A ‘Bryte’ JourneySince we launched our new brand, we have achieved several exciting milestones. At the end of March, we launched the Bryte Crime Tracker, which is an indicator of long-term crime trends in South Africa as captured by insurance claims. It has been well-received by the market, fulfilling its aim as a platform to share information and tips with the public to ensure they proactively reduce their exposures through better risk decisions. Additional changes include our new structure, a renewed focus on being a transformed and responsible corporate citizen, operational efficiencies, and enhancements to our claims processes, which are unpacked further in this newsletter.

As we continue, I look forward to the future milestones we will reach and the mutual success stories we will craft as partners in the sector.

Warm regards,Edwyn

EdwynO’Neill CEO Bryte Insurance

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BRYTE CEMENTS ITS PARTNERSHIPS –TOGETHER, WE ARE BETTERBy Wim Morland, Executive Head: Insurance Partnerships

Following our brand revamp, we have seen a revitalisation of ideas and ways in which we do business, whilst at the same time quietly ‘sticking to our knitting’ in what we do best. A key component of our ongoing success is the long-term partnerships we have forged to date. Below is a quick snapshot of the latest developments and trends in each corresponding sector…

Dangerous Phishing ExpeditionsAccording to the South African Banking Risk Information Centre (SABRIC), South Africans lose more than R2.2 billion to internet fraud and phishing attacks per year. Despite the financial services industry investing heavily in security measures, businesses and individuals continue to fall prey to phishing attacks. In fact, cybercriminals are becoming more and more sophisticated in how they carry out phishing attacks on unsuspecting victims.

Phishield has a tailor-made solution, providing financial cover for this particular type of cybercrime. An acceptable degree of risk mitigation must be in place for the cover to be effective, for example, installing a suitable internet security system on relevant systems or IT infrastructure.

According to Norton, a security software developer, a phishing attack is “where an unsuspecting victim receives a supposedly legitimate email, often claiming to be a bank or credit card company, with a link that leads to a hostile website. These mails also install malware (malicious software) onto the user’s PC, which steals personal information, such as banking details, without the user knowing. Once the link is clicked; the PC can then be infected with a virus.”

“Every Dog and Cat has its Day”A report released by Insight Survey B2B Market Research on the South African pet care industry shows that pet owners are willing to spend in order to provide the highest level of care for their beloved pets. Most pet owners treat their pets as family members and are also willing to purchase premium pet products. OnePlan, a medical insurance provider, has claimed a sizeable share of the pet insurance market, incorporating routine cover and kennel cover when the owner experiences an unexpected health event. The company also offers customers a pet hospital plan which other service providers do not cater for. This looks at aspects such as accident cover and routine cover.

Period – January 2017 to date

Total number of pet claims – 5,434

Total value of pet claims paid – R3,8 million

Average claim paid – R708

Period – January 2017 to date

Total number of pet claims – 5,434

Total value of pet claims paid – R3,8 million

Average claim paid – R708

Period – January 2017 to date

Total number of pet claims – 5,434

Total value of pet claims paid – R3,8 million

Average claim paid – R708

Period – January 2017 to date

Total number of pet claims – 5,434

Total value of pet claims paid – R3,8 million

Average claim paid – R708

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Affordable Healthcare for your Domestic WorkerOnePlan has also designed specialised cover for domestic workers who have been marginalised by traditional medical aids, in the form of rejections and penalty fees. High premiums and a lack of trust and education on the fine print and heavy jargon are also some of the barriers that have made it difficult and sometimes, impossible for informal workers such as domestic workers to access medical insurance. OnePlan has stepped in to bring domestic workers affordable healthcare, with clear and straightforward medical benefits that are communicated in simple, easy-to-understand language. The cover mainly caters for major medical procedures and emergencies, with some plans offering minimum day-to-day benefits.

Keeping within the informal workers’ market, OnePlan has also developed a group policy for large construction projects where employers can get basic emergency cover for contract workers, even foreigners. The policy specifically covers on-site incidents.

OnePlan’s frill-free, user app helps lessen the administrative burden of submitting claims and accessing services, which also contributes towards keeping premiums affordable for members. The app allows users to load claims on the card, take a photo of the invoice to verify a claim, and check cover status and benefits at the touch of a button and make use of a call back service.

Taking Care of the Nuts and BoltsThe strained economy has seen a drop in the purchasing of new vehicles. In light of South Africa’s recent ratings downgrade, currency instability and inflation, it is likely that brand new vehicles may become unaffordable. Consequently, consumers are increasingly opting to buy second-hand cars, some of which are near or past their warranty expiry dates. Responding to this niche in the market, iMPAC works with over 300 second-hand car dealerships across the country offering insurance that covers damage on small and large mechanical and electrical components. This buys consumers some peace of mind and can easily be added to existing finance agreements. iMPAC has earned itself a great track record of service and putting the customer first, which is evident by its zero percent complaint record on sites such as HelloPeter.com.

As at the end of January 2017, the latest Bryte Crime Tracker shows that theft increased by 3.6% when compared to the previous year. Whilst managing theft risks on individually owned vehicles is often the focus, cars on the showroom floor also face very real exposures. Auto Trade Underwriting Managers (ATU) has carved out a niche insurance offering for second-hand car dealerships to protect high-value vehicles waiting to be sold. This market has enjoyed some phenomenal growth in the last six months; attributed mainly to the extensive risk awareness training ATU offers dealers.

Ultimately, our business is, and will continue to be, founded on the heritage of invested partnerships. Meaningful collaborations with sector specialists enhance our ability to proactively mitigate risks for our customers and their businesses, giving us access to key insights, developments and trends.

For more on our market-leading niche offerings contact the following people in our partnership business unit:

Wim Morland wim.morland@brytesa.com 071 471 7612

Anushka Naidoo anushka.naidoo@brytesa.com 082 468 9800

Adel Berning adel.berning@brytesa.com 072 630 6170

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Taking Care of the Nuts and Bolts (continued)

Bryte UMAs

AutoTrade Underwriters Telephone:011 764 3839

Email:atu@atu.co.zaWebsite:www.atu.co.za

iMPAC Underwriting Managers

Telephone:087 943 4973

Email:hennie@impacrisk.co.zaWebsite:www.impacuma.co.za

OnePlan Telephone:010 001 0141

Email:care@onegrp.co.zaWebsite:www.oneplan.co.za

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EMPOWERING THE CONSTRUCTION SECTOR BY PROACTIVELY MANAGING RISKBy Zain Hoosen, Engineering Specialist

South Africa’s construction sector has immense growth potential; the sector employs more than 1.4 million people, contributing in excess of R109 billion to the country’s GDP. With continued investment into infrastructure development – both private and public – the need to proactively mitigate against an associated diversity of risks is critical to ensure increased and sustained growth.

To cater to the evolving needs of customers within the sector, Bryte has launched an update to the amended Contractor’s Plant and Machinery and Liability to Third Parties policy (previously known as the Plant All Risk policy). The changes were informed by our insights into the evolving construction landscape coupled with a considered customer needs analysis. This amendment was then designed to ensure full compliance with all components of the mandated TCF outcomes.

Now available on a stand-alone basis, our Contractor’s Plant and Machinery Policy customers benefit from wider cover, clarity around the basis of indemnity and the ability to determine indemnity as well as processes around the settling of claims. Below is an overview of some of the key changes, which came into effect from 1 July 2017:

Inclusions Removed

Liability to third parties Condition of average

Responsibility resting with the policyholder to establish near accurate values of insured assets

Complexity around options to hire substitute plant and machinery removed. This cover is available on a needs basis under Section 2: Hired-in plant and machinery of the policy – to be separately negotiated

Combined limit on removal and recovery costs – limit increased to R250,000/25%

Currency fluctuation buffer – capped at 20% (at no extra cost)

Cover for liability to third parties

An adjustment of the premium clause

As you are our valued partners, we urge you to consider the following when engaging with policyholders to ensure they are adequately covered:

• Discuss requirements with policyholders to clearly determine the appropriate basis of indemnity.

• Ensure that policyholders are insured for the replacement value of assets rather than the cost of purchase.

• Conduct periodical assessments (every six months), considering currency fluctuations and inflation, to ensure correct values for assets.

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At Bryte Insurance, our value proposition to partners and customers remains focused on mutual success. We believe in proactively mitigating customer risks. Therefore, we revisit assumptions, product conditions, pricing guidelines, underwriting rules, etc., on an ongoing basis. However, the impacts of current global and national macroeconomic factors are widespread, and this necessitates corrective action from time to time. This could range from the monitoring of our opening claims reserve, reducing policy terms, changing our approach to the risks we target, and instituting premium increases.

To ensure the best premiums for your customers, optimal underwriting and to reduce the risk of underinsurance, we urge you to take customers through the amendments within their revised policies. This will help you to facilitate full alignment, a clear understanding of the macroeconomic variables and the accuracy of sums insured.For more information on the policy changes, please feel free to contact me on 011 370 9107 or zain.hoosen@brytesa.com or reach out to JP Holmes on 011 370 9049 or juan.holmes@brytesa.com.

While currency fluctuations and inflation significantly increase the risk of underinsurance, there are other challenges presented that policyholders should be cognisant of, such as:

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ON THE GROUND IN KNYSNA By Cloud Saungweme, Chief Claims Officer

The recent Knysna fires were a tragic reminder of just how quickly and severely things can go wrong. Amidst the sheer devastation, it was immensely encouraging to watch businesses and individuals come together to offer support to the victims. What also made me feel very proud was how quickly Bryte and our employees rallied together to do their bit to help customers and the wider Knysna community.

Bryte immediately assembled a cross-functional response team to prioritise affected customers (including Bryte claims and customer service employees, brokers and loss adjusters) and three members of our executive team recently flew down to Knysna to provide on-the-ground support and assurance to those impacted by the blaze. Both en route to and on arrival in Knysna, the devastation and impact was palpable. Dozens of homes had been razed to the ground and thousands of people had been displaced.

Edwyn O’Neill (CEO), Chris Grieve (Executive Head: Broker Distribution) and I met with some of our customers and had very fruitful engagements with brokers and the Knysna Tourism Board (KTB). During a catastrophe, such as this, expediting claims is certainly a priority, however, so is a personal response from insurers as well as face-to-face interaction with those affected. Thirty-six goodwill payments of R10,000 were provided to Bryte customers to assist them whilst their claims were being processed. We also adjusted requirements and turnaround times to accommodate special circumstances which included waving the need for upfront documentation in situations where it just was not possible.

As animals in the area were also severely impacted by the fires, Bryte paid a visit to the Knysna Animal Welfare where water and cell phones (for workers who had lost everything) were donated. Furthermore, as tourism contributes to approximately 70% of the region’s economic activity, we assured the KTB that we would continue to partner with our hospitality customers in the area and support them in rebuilding the industry. This was demonstrated through the interim payment of R100,000 within three days of submitting a claim as well as a commitment to continued collaboration and information sharing between Bryte and the Board.

We also met with 35 broker partners and five loss adjusters, presenting our combined disaster response strategy. Very often, after a disaster of this nature, insurers have to put a moratorium on new insurance customers. Bryte, however, is still open for business for potential new customers in the region.

Overall, the key learning is that organisations should have the discernment to realise that a ‘business as usual’ approach is not always appropriate, especially in the face of a disaster. My challenge to you as partners in the insurance business, is to change the narrative around our industry by putting people first.

Southern Cape fires overview

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8 June 9 June 10 June 13 June

Claim quantification

Employeemobilisation

Goodwillpayments

First claim settled

Interim payments

Emergencyresponse

Claims prioritisation

11 June

Southern Cape fires claims updateClaims received as at Monday, 26 June 2017

Southern Cape Fires Claims Update

On the Ground in Knysna (continued)

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NEW REGULATORY REFORMSBy Wynand Louw, Head of Compliance

Providing a Solid Foundation for Good Business ConductThe urgent need to refocus on governance and transparency in South Africa is front and centre of the current news agenda. We should not lose sight of the fact that in many sectors – insurance for example – there is still a strong focus on rule of law in implementation and accountability. In fact, the Financial Sector Regulation Bill (Twin Peaks), together with other draft legislation affecting our industry, has already been published for public comment and is going through the parliamentary process.

Under the proposed Twin Peaks model of financial sector regulation, a prudential regulator – the Prudential Authority – situated in the South African Reserve Bank (SARB) will be created, while the Financial Services Board (FSB) will be transformed into a dedicated market conduct regulator – the Financial Sector Conduct Authority.

As part of a phased approach applied to implementing the Twin Peaks reforms, National Treasury has recently published the draft amendments to the Regulations and Policyholder Protection Rules (PPRs), which form part of the Short-term Insurance Act (STIA) and the Long-term Insurance Act (LTIA). These amendments will, amongst others, pave the way for legislating the Treating Customers Fairly (TCF) principles, which aim to further improve customer protection and outcomes in the financial services industry. You will be aware that TCF is a business imperative for Bryte (see “Our Approach in Driving TCF” below) and we have invested significantly to ensure our business is aligned with this initiative.

Other Draft Amendments to keep in mindRetail Distribution Review (RDR)The FSB has published draft amendments to the STIA Regulations and the PPRs, in line with implementing National Treasury’s policy framework for market conduct or policyholder protection. These changes are transitional, and interim in nature, and give effect to some of RDR proposals and other policy documents.

The regulator views these changes as necessary to address existing conduct of business risks and abuses. This means that the changes cannot be deferred to the enactment of the Conduct of Financial Institutions Bill (the envisaged end-goal in law for market conduct). The aim is to effect these changes in two ‘tranches’, the first of which is the current draft amendments. The regulator aims for tranche 1 changes to be effected during the second half of 2017.

The tranche 1 proposed changes mostly cover initiatives that have been front of mind for – and addressed within – the business strategies of informed insurance sector professionals. They include:

• Binder arrangements

• Remuneration

• TCF

• New products

• Complaints management

• Consumer credit insurance

• Advertising and marketing

• Claims management and termination of policies

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Data Privacy – Protection of Personal Information Act (PoPI Act)The Information Regulator has been appointed and the next steps include the formulation and publication of the regulations accompanying the PoPI Act, which will likely initiate the one-year implementation period for entities to comply. The Regulations are expected to be finalised late in 2017.

Financial CrimeNational Treasury is proposing to amend Schedule 1 of FICA with the aim of declaring a number of financial entities as accountable institutions (including short-term insurers and brokers). If approved, this would indicate that Bryte would have to follow customer due diligence procedures, such as the ‘Know your Customer’ and other measures similar to the banking industry.

Currently, amendments to the Act governing these aspects are being debated in parliament. The most fundamental proposed change includes the shift from a rules based approach to a risk based one, specifically for customer due diligence and anti-money laundering measures taken by organisations such as insurers and brokers.

CybercrimesDraft legislation makes provision for over 50 new cybercrime offences. It also outlines the establishment of a 24/7 point of contact and various government structures that specifically deal with cybersecurity. Bryte’s responsibilities as an insurer will be to:

• take reasonable steps to inform customers of cybercrime trends that may affect them;

• establish procedures for customers to report cybercrimes to Bryte;

• inform customers of cybercrime safeguard measures; and

• immediately report cybercrimes to the National Cybercrime Centre and preserve any information in the prescribed manner, which may be of assistance to law enforcement agencies.

The Bill is currently being discussed in parliament and is expected to be published during 2017.

Our Approach in Driving TCF: Complaints Management for Service ExcellenceWe have been talking about TCF, the regulation that requires FSPs to implement business initiatives that align business strategy with the outcomes described in the TCF framework, for many years.

One area of focus for us is “Complaints”, described in outcome 6, which is also an area of key emphasis for the regulator. To comply with the measurement criteria, we believe that we must be in a position to extend the measurement and tracking of customer complaints beyond our business to include those managed by our business partners. This is the only way to ensure we benefit from holistic insights and can effect changes to drive service excellence and negate or eliminate the root causes of customer dissatisfaction.

It is often said that, in this modern world, the power of knowledge rests on our ability to share it and by doing so, work together towards mutually beneficial solutions. Therefore, in order to secure service excellence that benefits you, our partners, our own business and our customers, we are asking you to co-invest in knowledge-share. We would appreciate it if you could allow us to capture your complaints register(s) on our own systems for analysis purposes. Our goal is to use this business intelligence to improve the customer experience throughout our service value chain – to the benefit of us all.

Please may we ask that your monthly complaints register is sent to claimscomplaints@brytesa.com or nonclaimscomplaints@brytesa.com. If you do not currently maintain a register, we would urge you to introduce one and/or discuss the implementation of same with your system provider.

New Regulatory Reforms (continued)

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TRENDS AND INSIGHTS IN MOTOR AND PROPERTY INSURANCE By Cloud Saungweme, Chief Claims Officer

Currency Weakness Drives up Cost of RepairsOver the last four years, we have seen the South African Rand gradually weaken against major global currencies, most particularly the US Dollar (USD) and the Euro. The significant impact that this has had on motor and property insurance claims – and underwriter sustainability – is often misunderstood by brokers and customers.

The steady rise and popularity of foreign-manufactured vehicles in the South African market over the last few years means that for many people, car repair requires the provision of imported spares at foreign currency rates. The currency rate fluctuations impact the cost at which parts can be imported which in turn increases the cost of the repairs. Over time, logic dictates that this has a knock-on effect on premiums if the insurer is to maintain a viable business.

Illustration of Motor Parts Inflation Over a Two-year Period

18%16%14%12%10%

10%

17%

13% 13%

8%

Nissan

Avg 2 yrs

KIAHyundaiFordBMW

8%6%4%2%0%

Data indicates that motor vehicle component prices have increased by between 15 and 47 percent. The prohibitively high cost of replacing parts, coupled with long waiting periods to receive these parts have left insurers with little choice but to write off vehicles which would previously be repaired, if the cost to do so was not more prohibitive than that of merely paying a replacement value.

Furthermore, if a customer is going to have to wait seven months to receive imported parts to repair their vehicle, then the Treating Customers Fairly (TCF) approach mandates that the correct action to take is to replace the vehicle instead of ‘punishing’ the customer for market dynamics.

Keeping Pace with TechnologyAnother factor which contributes to the high cost of repairs is the frequency with which vehicle models are being updated. Some manufacturers have been known to release new car models every six months, in a bid to “stay ahead of the pack” in terms of offering new designs. Manufacturers naturally prioritise having a high inventory of parts for newly launched vehicles which are in demand, resulting in parts from older models being scarce and more costly.

The advent of electronics featuring prominently in vehicle configurations has also created an unintended consequence. For example, previously minor damages to vehicles, such as bumper bashings, when electronic sensors enter the scenario, have quickly escalated into complex and costly repair jobs comprising a high proportion of the total value of the car.

Therefore, we need to continuously educate our customers about the added complexity, cost and length of repairs to vehicles that have technology features such as sensors and on-board computer systems.

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Household Items and PropertyThe property and household market is facing similar dynamics because 90% of electronic goods and items of value are imported. If the Rand remains weak, the cost of repairing and replacing items will also remain high. As far as possible, brokers should encourage customers to fix components of electronic gadgets rather than replace the entire insured value of the item. For example, if the screen of a high-end mobile device is shattered, the cost of replacing it could be a quarter of the total value of the phone, but often, customers prefer to replace the entire item – then wonder why their premiums increase. There is also a strong need to educate customers to better maintain and protect their belongings to extend their life cycles. Customers are sometimes negligent in taking meticulous care of a valuable item and use the excuse “it’s insured” as a scapegoat.

In other instances, a customer may genuinely believe that they have put in security measures for their belongings, only to discover that the protection is not actually being enforced. A case in point is a customer who ‘activated’ his property’s alarm system daily before going to bed, only to find out that there was no signal. This meant that even when the alarm was activated, the tactical response company could not be reached to respond and intercept the robbery. In terms of his insurance policy then, he was not covered for subsequent loss. This was a sad and painful learning which could have been averted had regular checks on the alarm system been done.

Here is an overview reflecting some of the most common property-related claim categories. Theft and burglaries remain among the top reasons for claims.

In conclusion, as advisors, we need to continuously keep pace with any and all market dynamics which may affect the environment in which we operate. Our true value is in being proactive advisors protecting our customers ahead of risk. After all, relegating ourselves, and our customers, to being behind on trends could significantly affect the shared value and collective success we all want to enjoy.

Trends and Insights in Motor and Property Insurance (continued)

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Contact

Registered Address

15 Marshall Street, Ferreirasdorp,

Johannesburg, 2001, South Africa

T+27 (0) 11 370 9111

www.brytesa.com

Postal Address

PO Box 61489, Marshalltown, 210

Bryte Insurance Company Limited

A Fairfax Company

Registration No. 1965/006764/06 | Authorised Financial Services Provider No. 17703