BUSINESS STUDIES
Divashan Naidoo
GRADE 12.2
ASSESSMENT TASK: SECONDARY RESEARCH TASK/INSURANCE
Brainstorm of the crime situation in South Africa
Different forms of crime do exist all throughout South Africa
Changes in crime statistics over the years
Impacts image of country, as well as businesses
Impacts opportunities to attract investors to South Africa to aid in the growing of our economy.
A total of 2.206 million crimes were committed over the period, up marginally – 0.09% – from the 2.204 million reported in 2014.
According to Police commissioner Riah Phiyega, 1.8 million crimes were reported to the SAPS over the past year, and the rest of the crimes were identified through police action.
The biggest crime category to increase over the past year is sexual offences discovered as a result of police action. This includes crimes such as charges for prostitution and possession of pornography.
Between April 2013 and March 2014, there were 4,720 reported cases of sexual offences identified by police officers – in the April 2014 to March 2015 period, this jumped 34.3% to 6,340 cases.
http://businesstech.co.za/news/government/99648/2015-crime-stats-for-south-africa-everything-you-need-to-know accessed 18 August 2016
– 2014 crime statistic of 2.204 million crimes committed
– 2015 crime statistic of 2.206 million crimes committed
SA crime stats for 2015
Category 2014 2015 Change
Aggravated Robbery 50 194 53 639 6.8%
Contact-related Crimes 123 441 125 789 1.9%
Crime detected as result of police action 350 403 356 919 1.9%
Contact Crimes 611 574 616 973 0.9%
Property-related Crimes 558 228 553 487 -0.8%
Other Serious Crimes 510 748 499 698 -2.2%
Total 2 204 588 2 206 505 0.09%
http://businesstech.co.za/news/government/99648/2015-crime-stats-for-south-africa-everything-you-need-to-know accessed 16 August 2016
The brainstorming reveals that crime has been on an increase in certain categories, and has changed in others, but the threat of crime hindering South Africa’s reputation still looms.
Insurance and its relation to the South African crime situation
The Solution
Camargue stands firm in the belief that traditional Fidelity Guarantee polices do not provide sufficient protection from the diverse array of risks faced by the commercial environment, which include employee fraud, embezzlement, corruption, money laundering, computer fraud, extortion and contractual penalties. Camargue’s Commercial Crime product offers a comprehensive cover solution.
Why you need it
Commercial crime is estimated to cost the South African economy billions of Rands annually. Year on year statistics show an upward trend in the number of commercial crimes reported. A growing risk, never has it been more important for companies to protect themselves against direct financial loss as a result of theft and fraud.
http://www.camargueum.co.za/product/commercial-crime-insurance
Accessed 2016
“Unfortunately, short-term insurance premiums will continue to increase as long as crime, violence and fraud continue to escalate. That’s because insurance companies must account for the risk of crime in their premiums.
“If crime could be tackled and curtailed successfully, resulting in a reduction in claims, we would certainly see premiums coming down,” says Auto & General Insurance’s director, Angelo Haggiyannes, adding that 30% of the costs of all motor claims are crime-related.
Unfortunately, crime – including hijackings, house robberies, burglaries, theft, commercial robberies and fraud – remains prevalent. As a result of crime – and high inflation – some consumers are being forced to cancel their insurance cover in the interests of cutting costs.”
http://www.moneyweb.co.za/archive/the-impact-of-crime-on-short-term-insurance/ Accessed 2016
As we can clearly see, the crime situation impacts people into reducing their insurance investments, or cancelling them completely due to lack of means to continue paying for insurance. With an increase in crime, so comes an increase in insurance premiums.
Choice of clothing retail outlet
My choice of clothing retail outlet is Mr Price, as this business is the one we are working with in the syllabus.
We already have a lot of insight into the company, so we can see how different elements will impact the organization as a whole.
As Mr Price is a large and growing brand, it will need the appropriate insurance policies to be protected from possible incidents.
Mr Price, to me, is the ideal choice when it comes to clothing retail. With their target market being young adults, and teenagers, as well as people in their mid-20s to 30s, the company attracts the attention of the majority of youth of South Africa. Trendy fashion, good prices, and availability are practically the crux of clothing retail outlets, and Mr Price is able to provide that. As well as the ability to make it easier for the consumer to shop, by providing their entire range online. A characteristic not shared by any other clothing retailer in South Africa.
Mr Price is predominantly a cash seller, with cash sales making up 80% of the company’s sales, and 59% of the company’s turnover comes from the Mr Price store division of the Mr Price Group.
Mr Price is a large brand, and has many stores branched out nationwide, and are even looking to expand into Mozambique and more of southern Africa.
This means more stores, which also means greater risks, such as crime, inflation, and other factors that will affect the growth of a business in a country.
In the Mr Price March 2015- April 2016 Annual Integrated Report it shows a growing trend in net worth, equity and capital. This will most likely attract the intention of foreign investors to start looking at opportunities to invest in Mr Price, in South Africa. Again, another risk. But with much risk, there is also potentially much reward, and in order to assure this, Mr Price needs the best possible insurance premiums available in order to cover all aspects of the business that are vital to productivity and cash flow. With the location of the stores being in different areas all across the country, they will each require a specific type of insurance, but collectively, each store will also have to have standard insurance covers that every other Mr Price clothing retail outlet
Summary of concepts relating to insurance and assurance of Mr Price
Different types of insurance for Mr Price as a clothing retail outlet
Business property insurance: This type of insurance will cover store location and contents inside, including equipment, inventory and fixtures. As Mr Price has many stores nation-wide there is a big risk of damages being done to the business, so this type of insurance is an essential for the business.
Business Income coverage: Allows you to continue to receive income while your store and its contents are being rebuilt and replaced. It not only helps you to cover expenses needed to keep a business operating after a loss, but it also helps you to replace lost revenue. This type of insurance will benefit Mr Price hugely as it can help the different store owners recover lost revenue and income, as well as help the specific stores still receive an income during their re-building/replacement, after an event that will hinder business operations, such as a fire or flood.
Liability Insurance: Ensures coverage of the business in the event of mistakes, accidents or injuries. This type of insurance will come to aid when a customer wants to file a claim for injury at a Mr Price store, or will want to file for becoming ill from a product Mr Price has sold them. This will protect and cover the business in events like these which are bound to happen.
Business Crime Insurance: With retail businesses, this type insurance is absolutely important, as it will provide coverage if employees steal money, securities or property from Mr Price, which is highly possible.
These 4 common coverages are essential for retail businesses, especially for those like Mr Price, which are big businesses with many stores. These coverages cover a wide base of possible incidents, and are focused on the main events that disrupt business functions and create a negative image for the business.
Mr Price, as a clothing retail outlet, must have the appropriate insurance types in order to prevent the different stores from losing income, as well as much more.
https://www.farmers.com/business/industry/retail-stores/
Compulsory and non-compulsory insurance
Compulsory insurance: This is a type of insurance that is required by law. This insurance is required before engaging in specific activities, and is meant to protect you from harm in any way.
Example: A type of compulsory insurance that is needed in all businesses, especially in Mr Price, is cover against fire and storm damage. No matter which industry the business may operate in, this is always a major concern of businesses, as an interruption like such may cause major loss in the companies’ cash flow. Proper risk assessment should be conducted in order for the company to asses if more compulsory insurance is needed.
Non-compulsory insurance: This type of insurance is voluntary, and it is in the own interests of the business to decide whether or not they will have this type of insurance. It is not required by law, but can still provide additional protection to the business.
Example: A non-compulsory, but still advisable insurance type to have for retail businesses, would be cover against theft by outsiders. Although theft is a major issue and this type of insurance is not compulsory, the business has the choice to have this cover or not. Other non-compulsory insurance types are used for more specific types of the cover a business may feel that they need, such as; Alien abduction insurance or pet insurance.
Recommended South African insurance company for Mr Price
“At Santam, we believe in a simple principle – that insurance should add value, not questions and uncertainty. It should provide peace of mind, not parameters and excuses. Our expertise comes from understanding what is important to you and treating your business as seriously as you do. Our Commercial offering is about providing you with insurance that is good and proper.” https://www.santam.co.za/media/2283/za30sant002118-santam-commercial_brochure_business_210x210.pdf accessed 2016
I have recommended Santam as an appropriate South African insurance company for Mr Price. Santam is:
• South Africa’s leading and most influential insurer. They have been voted the best Commercial insurer by the Financial Intermediaries Association for 5 consecutive years (2008-2012).
• They provide the 4 types of insurance covers mentioned previously in the assessment.
• As well as a wide range of compulsory, and non-compulsory insurance to help Mr Price with additional protection.
“OUR STANDARD BUSINESS SOLUTION PROVIDES COVER FOR
Buildings (combined)
Fire
Business interruption
Theft
Office contents
Money
Glass
Goods in transit
Business all risks
Accidental damage
Fidelity insurance (theft by
employees)
Public liability
Personal accident cover (individuals
and employees)
Vehicles
Electronic equipment
Machinery breakdown
Business interruption (following
machinery breakdown)
Deterioration of stock”
These are examples of their STANDARD business solutions, which are not limited to the ones mentioned above. Additional cover can be provided if required by the business.
I believe that Mr Price should be insured by Santam because of the wide range of policies they cover.
In the events of fire, theft, damage, and business interruption, just to name a few, Santam will be able to cover the expenses as well as much more.
This was my view on Mr Price, and it’s need for the right insurance.