Clarendon Transport Underwriters (CTU), has come a long way since it opened its doors in Greenside in February 1991.
"We are constantly striving to find new ways of doing things better."
But by sticking to its niche and having a very focused approach to its core business, it has consistently shown an underwriting profit over the past decade.
Managing Director Louis Fivaz is justifiably proud of its success in a difficult market.
Underwriting the taxi industry is certainly not for the fainthearted, but Fivaz believes that it can be done successfully, as our previous features have shown (see September 1996, pages 20 to 24 and January 1998, pages 13 to 17). "There are three basic principles we've consistently adhered to," he says, "pricing the product correctly, outsourcing anything that we do not regard as our core business and giving personal service to the brokers who support us. Those are the differentiators which have kept us ahead of the competition."
As far as pricing is concerned, CTU uses actuaries to ensure sound underwriting practices, its systems and IT requirements are outsourced to Dexdata, with whom the Group has had a long and rewarding partnership, and as far as service to brokers is concerned, a 24-hour turnaround time on claims is targeted. "We don't always achieve this," admits Fivaz, "but it's what we aspire to and it really counts for something with customers - after all, it's how claims are handled that shapes their perceptions of the industry."
Fivaz stresses the importance of CTU's relationship with the 500-odd brokers who are responsible for bringing in business, and is enthusiastic about the increasing number of black brokers who are its clients. "Although we are centralized in Johannesburg without a branch structure," he points out, "technology enables us to communicate country-wide, and its encouraging that more and more small brokers are developing their own infrastructure, which leads me to believe they will become a growing force in this market. To me this is empowerment at work and I'm really passionate about it, so we'll certainly support the emerging broker market in whatever way we can."
What's on the shelf?
As far as products are concerned, CTU offers comprehensive cover as well as balance of third party, fire and theft for taxis, coaches and midi-buses, together with extensions such as personal accident, passenger liability, credit shortfall, violation and abscontion cover, lease cost, loss of use and funeral insurance, the latter being underwritten by Safrican. Premiums are collected by cash or debit order, which necessitates a high level of interface between broker and customer. "In this sort of market," observes Fivaz, "it's very important that the broker keeps in contact with his client, so as to minimize policy lapses."
Although Fivaz/. 'holds the pen' when it comes to both underwriting and claims, Fedsure General and Hannover Re of Africa, who together hold 80% of CTU -the remaining 20% is owned by management - act as insurer and reinsurer respectively: both have a long-standing relationship with the Group (see boxes).
As far as the structure of the Group is concerned, CTU Holdings owns 100% of Clarendon Underwriting Managers, which underwrites private cars for the emerging market, and a relatively new company, Clarenfin, which discounts invoices for authorised panel beaters - it may extend its activities to financing taxis in the future, says Fivaz.
A difficult market
Which brings us to the state of the market, about which Fivaz has some interesting observations. "It's always difficult to price this sort of business correctly," emphasises Fivaz, "because of the continuing high incidence of hi-jacking and fraudulent claims, which have to be monitored very carefully. Here 1 believe the industry has a responsibility to help put the fraudsters behind bars - our approach is certainly to bring perpetrators to court where they get found out. That said, loss ratios do seem to be stabilising, and the installation of tracking devices - which we certainly encourage - has helped to act as a disincentive when it comes to theft and hijacking."
Fivaz shares a growing industry concern that the short-term market is contracting, which he believes is unhealthy for both brokers and clients. "It's difficult to pinpoint the reasons for this," he says, "but apart from mergers and takeovers, it does seem as though some companies are finding it difficult to control both expense and loss ratios, so they end up with the worst of both worlds. There is also the problem of growing resistance on the part of consumers to continuing premium increases, which results in them following the self-insurance route."
A core problem
And this, of course, is one of the main problems that CTU faces, with some 85% of the estimated 150 000 taxis on the road being uninsured. "We have both a marketing and an educational job to do in this regard," says Fivaz. "Whilst fleet owners follow the self-insurance route, we target the individual taxi owner, who very often allows his insurance to lapse after his hire-purchase agreement comes to an end. It's up to us to persuade him about the importance of being insured, which very often he sees as an intangible benefit - until a claim happens!"
Commenting on the recapitalisation programme that the government is pursuing with the taxi industry, Fivaz believes that it will lead to a more orderly situation, but stresses that nothing has been finalised to date. "It seems likely that we will end up with a number of preferred suppliers," he says, "and that purchasers of those vehicles will enjoy a subsidy, but no-one will be compelled to buy from any particular source. I'm sure that recapitalisation will take place, but not in the form in which it was originally envisaged. The needs of taxi drivers when it comes to things like medical aid and pension funds certainly need to be accommodated in some way."
Staff and service
Although CTU's premium income now exceeds R70m p.a., its staff complement has remained at 25 for some time, and Fivaz attributes this to Dexdata's sophisticated software which enables the office to function effectively with manual work being kept to a minimum. "This does mean however," Fivaz points out, "that each of our staff members plays a key role in the organisation and I insist on certain levels of qualification whilst at the same time encouraging them to further their studies wherever possible. I also fully support the aims and objectives of the South African Underwriting Managers Association in their drive to make this arm of the industry more professional.
...and the re-insurer.
Clarendon Transport Underwriters, the definitive insurer of taxis in South Africa is a wonderful lesson in insurance underwriting. It proves that if one applies concentrated focus, good management with strong ethics and sound service, even the most difficult classes of business can be underwritten profitably.
CTU is proof that focus can result in profitable underwriting results. The company has studiously and systematically pursued the underwriting of high-risk business for over 10 years, and has been successful in producing a positive result in almost every one of them. Its focused attention results in understanding the key risk areas, and its accumulated data base established over ten years, gives it a competitive advantage when considering new business and/or the renewal of existing accounts.
Louis Fivaz and his team have consistently sought to improve their management and underwriting techniques whilst outsourcing the issues that are not core or relevant to the above two processes. They continuously look at ways of improving risk assessment, pricing and selection of risk.
There's adequate proof that underwriting is not a one day wonder. Underwriting profits are more the result of discipline over time, than bright ideas in the short term.
Finally, their commitment to applying good ethics, fair principles and good service to a client base and a class of business, which is notorious for its robustness and at times questionable practice, again proves the point that good long term sustainable practice triumphs over short-term opportunism.
Clarendon Transport Underwriters is more than just a professional underwriter of a high risk area of business. It serves as a beacon that other equally difficult or problematic classes of business can be tackled profitably, professionally and in a win-win environment for both insurer and client.
For us at Hannover Re who have been fortunate to have been associated with this Fedgen initiative of some 10 years ago, we are delighted at the profits it has produced, but more importantly are thrilled to be associated with a company which reflects high standards, and wonderful innovation.
Furthermore, CTU's ever improving use of technology is making this an outstanding organisation with which to be associated. We are most proud of our involvement with them.