Question 1

1.1 The economic growth is not a constant process it varies from year to year. Business cycle is a
pattern of expansion and contraction of the economy. The expansion is referred as upturn and
contraction downturn or recession.
Insurance Industry now is on the downturn.
The impact of COVID-19 pandemic has affected the insurers in so many ways.

i) Failure to maintain the existing business. The declared of lockdown put so many
commercial clients out of business, they had to totally close their businesses, and some
could not recover which resulted in cancellation of their existing policies due to non-
payment of premiums. The cancellation of policies is loss of revenue to the insurer,
some policies for clients who survived the COVID-19 reduced their sum insureds due to
financial problems.
ii) Reduction in production and services
iii) Retrenchment of employees due to the above

As a result, not much, new business was realized.

High volumes of claims. Business interruption claims – client claiming for loss of profit due to
contagious and infectious diseases for those who had these extensions. It was long debates and
court cases which cost insurers a lot of money for legal fees trying to defend. Some had to pay
billions for these claims which has caused market to harden and impose exclusion of some
extensions.

Closure of businesses caused increases crime rate in the country. This problem goes back to the
insurance industry as it must pay theft claims and decreasing the insurance pool of this type to
risks.

1.2

Price Stability – the was affected because it was not only the increase of general level of prices
called inflation but an increase in a larger magnitude because of the claims experience due to
COVID-19.

Full Employment – one of the macroeconomics is to put the level of unemployment as low as
possible as it has a serious impact for both the economy and to the individuals. When
unemployed a person suffers both materially and psychologically. The closing of businesses
during lockdown has increased rate of unemployment.

Economic Growth - when the economy is increased the production of goods and services will be
increasing from time to time. But if this is not happening and the population is increasing then
average living standards cannot increase and not enough to create jobs for the growing
population. That is exactly what happened during the COVID-19 lockdown there was less
production of goods and services, yet the population was still increasing.

1.3
The insurers should come up with new products that will meet the needs of the clients even if it
means extra cost to client.

Reference:

Economics for South African Students 5th Edition

Editor: Philip Mohr & associates

Question 2

2.1 Brokers should provide professional insurance solutions to client.

Gather all the relevant information and understand the business of the client thoroughly.

Do need analysis and market exercise for the client to make sure the get appropriate covers and
pay fair premium for the covers provided, they get value for their money.

Explain thoroughly the covers to the client and make sure they understand what they are
covered for. All the discussions should the followed by a written confirmation with a simple
language that the client can understand.

Address and answer client’s queries

Do the market update to the clients, regularly inform them of changes e.g new cover, changes in
policy conditions.

Collect premium and pay it over to the insurer.

Assist client with the claims, completing claim forms, compiling all relevant documents as well as
making follow up until the claim is finalised.

The broker must make sure that the claim is settled fairly and timeously.

2.2

2.2.1 Consumers – brokers act as the advocates for the client and take care of their interests

Need analysis and tailormade products for the clients

2.2.2

Collect premium on behalf of the insurer.

Bring business new business.

Value proposition solutions for insurer’ clients

Spread word of mouth for good products and good claims services provided by insurers.

Design new policy

Identify untapped market

Identify gaps in the policies based on client’s needs

Economy

SECTION B

Question 1

Company’s business model is to:

Provide value-add proposition products to the client.

Working with ethics gives the company good reputation as a result there will be trust and loyal
clients.

Employees Retention: making sure that take care of skills development to employees, rewards for
the good results and working tools – this will help the company to retain high quality staff member
and maintain excellent service to the clients.

Bringing up to the community – investing in project that stimulate the growth of economy and
empowering black-owned SME’s. The donation to assist farmers, workers and communities after
drought. This will increase economic growth which will result in the increase of average living
standards.

Good relationships with its stakeholders

1.2

1.3

a) The company provides all classes of non- life insurances being personal, commercial, corporate
insurance products. This is an advantage because for example if a client working for a corporate
company experience good service from A2Z Company will insure his personal property with the
same company. Again, if decision making person in an organisation has experience good service on
his personal policy, he will give A2Z chance to handle the insurance of the company he is working for

b) Capitalising on its own strength of underwriting experience and knowledge of superior products.
It makes the company to be different to its competitors.

They have an advantage of coming up with new products that talks to the client and always
upgrading and making them insurers of choice.

Compliance – the company partners and collaborates with associations such as SAIA and FIA which
helps it to sustain reputation to the stakeholders

c) Risk and claims management capabilities – clients need to be treated with respect and empathy
during their time of loss. They buy insurance to transfer risk and release their stress to enable them
to concentrate on other important issues. Good experience during the time of loss when a client is
in capable hands makes the client to be loyal to the insurer.
The client will stay with that insurer even if the premiums we to go high because of the assurance of
help during the dark days.

The client will market the A2Z because of the good experience and service.

d) Investing in employees gives a reward to the A2Z. This enables the company to secure the
retention of appropriate employees. Developing and transferring the skills helps the company to
provide quality services to clients and increase the rate of retaining client base and revenue. The
well-equipped employees get motivated resulting in good results. The expertise and knowledge are
also improved by scientific developments, social innovation and technology-driven change which will
result in the development of good and cost-effective insurance products provided to the client.

e) Financial muscle – A2Z source of income come from premiums received, investments income and
investment return on shareholder investments and maintain its income by effective
treasury/investment initiative, risk management and technology. The company has strong operating
flow of income which makes easy to operate the business effectively and allows the following:

Goods salaries to the employees and rewards.

Economic growth

Investing with Enterprise and Supplier Development Fund which assists in developing the growth of
black-owned SME’s.

Ability to improve price risk.

Donation to the community to assist the farmers and workers during and after the severe drought of
2018. Helping hand at the time of need makes the company recognised and be always remembered
by the community.

Capacity to pay claims which is a very good marketing tool for the business together with the claims
management capabilities.

1.4

The purpose of SAIA is not legally binding but set standards of desired conduct to its members

It ensures best practices in the non-life industry

Gives specific guidelines to be followed by members that provides non-life insurance products and
treat clients

Education to the non-life insurance industry to all stakeholder

A2Z collaborating with SAIA will help them to maintain its good relations with clients, intermediaries,
suppliers and communities and maintain its reputation

Being a member of this association