M&F gets warning on livestock insurance
June 18, 2008
By Mzwandile Jacks
Johannesburg - High verification and collection costs could stifle Mutual & Federal (M&F) from making a sound profit from the livestock insurance the JSE-listed insurer launched recently in the former Transkei, Imara SP Reid analyst Steve Meintjes said yesterday.
Meintjes said that although a Johannesburg-based assessor could make dozens of claims in a day, this might not be possible in a vast area such as the former Transkei. "The sheer logistics of doing these things are quite challenging. An assessor who has to do business in the former Transkei could only do one or two claims in a day."
Last week M&F announced that it had recently introduced the first affordable livestock insurance in the country, saying communities in the former Transkei had indicated that livestock was their wealth.
The company would pay a claim when there was bodily injury or disease resulting in death of the livestock. Causes of death that were not covered included war, riot and drought.
Mziwonke Hinxa, a magistrate based in Bloemfontein who has livestock in the Gatyane area of the Transkei, told Business Report that his horse, which had been covered by the livestock insurance, had died of an injury in the head earlier this year. M&F had paid out without even visiting the area to assess the horse.
Steven Isaacs, M&F's group manager of commercial development, admitted that the company had entered a high-risk environment because cattle theft was rife in the area.
The company said theft cover claims would be limited to two losses a year.
Isaacs said M&F had done extensive research before making the move. It was certain that in the next three to five years, it would realise a return on its investment.
But Meintjes said the company should have looked at things like the collection of premiums. "Are people who live in these areas properly banked?" he said.
M&F shares lost 0.8 percent to R18.48 yesterday. The non-life insurance sector fell 0.41 percent.
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