Understanding our products and services

Through our products and services we focus on meeting clients' needs, while achieving our core business goal of improving people's lives. By providing products and services that promote responsible financial management, and by engaging and raising the financial understanding of our clients, we contribute towards a more financially resilient society. We anticipate increasing demand in future for more socially and environmentally responsible products and services, and are experiencing increasing pressure to embed sustainability considerations more broadly throughout our sphere of influence.

We are seeking to develop and diversify our product offering to meet the changing needs and expectations of existing and new markets with the aim of growing our client base. The greater focus on internationalisation has presented new product and services expectations.

Financial Services Sector-Specific Product and Service Impact

The newly developed Sustainability Management Framework (SMF) outlines our management approach. The SMF includes the principles of responsible investment and responsible product. As indicated in the section on Promoting Responsible Investment, SIM has developed guidelines to incorporate sustainability principles into our investment decisions. The incorporation of environmental and social components into our products and services is therefore an area that we are currently developing.

As formal policies and procedures are developed we will be able to report on these aspects in more detail in the future.

Broadening access to financial services

The low-income sector represents at least 75% of the South African market and remains acutely underserviced in terms of risk, savings, investment and retirement products. By extending our coverage to include millions of South Africa's poorer communities, we contribute to the country's economic upliftment and create important new market opportunities for the Group. Sanlam Sky (now a part of SPF) focuses specifically on improving access to financial services in entry-level markets in the country. Through the Sanlam Foundation, our strategic investments in education, together with sponsorships for example of Takalane Sesame, have positioned the Sanlam brand closer to this market. Coupled with efforts in recent years to provide tailored products to this market, this has seen Sanlam Sky's contribution to the Group increasing from R120 million in 2010 to R203 million in 2011.

The current focus of demand is for funeral policies, based on a need rather than an economic driver. While considerable efforts have been made to educate consumers around the importance of saving, to date we have not been able to develop a product that meets these saving needs while also being viable for the company.

Developing products that promote good financial management in the low-income sector in
South Africa

Sanlam Sky has, in recent years, put a great deal of effort into tailoring products to suit the needs of the low-income sector.. By providing appropriate risk, savings, investment and retirement products, Sanlam Sky promotes good financial management. A mistrust of financial institutions and the poor level of education of clients in this sector, has required that Sanlam Sky provide products that are easy to understand and tailored to the needs of these communities.

We have tried to find solutions that balance our need for products to be commercially viable and the needs of the market. One of the ways that we are trying to achieve this is by grouping elements that promote good financial management and financial risk mitigation into viable products.

Funeral products continue to be popular in this market. They represent more of a cultural need rather than a product that promotes good financial management. Sanlam has tried to combine various elements into these products. A range of bundled products, with positive financial management benefits, has been developed.

Sanlam Sky has a Funeral and Survivor Plan which also protects clients against inflation and provides unemployment and pregnancy support. Other products aim to help clients manage financial shocks by providing savings plan, inflation protection, catastrophe benefits, hospital cash benefits, severe illness protection, HIV protection and loss of income protection. Sanlam Sky's Masterplan offers an option to save for retirement or other specified need in the future in addition to benefits on events such as hospitalization, funeral and disability. Sanlam Sky is currently developing Save to Study and Save Today plans.

Channel Life's Provider product includes disability cover, inflation protection, and various medical benefits in addition to funeral and life cover. Their Funeral Provider product has similar benefits but also includes a savings option. Channel Life's Masterplan offers additional options to save for retirement or other specified need in the future. Channel 4 Life provides similar products but includes benefits for the policyholder's broader family.

Addressing product regulation

The Sanlam Group is facing growing demands and associated costs in meeting the requirements associated with increasing regulation, both in general as well as specifically in the financial services sector. This new regulation is coupled with a greater focus on enforcement. With potential fines of up to R100m for technical offences, the need for effective internal compliance systems has become more significant. At the macro-economic level, new policies on social and environmental issues are likely to result in increased living costs, leading to reductions in the disposable income of clients with knock on effects for our business

Our business faces direct impacts associated with a number of new regulatory focus areas, including:

Resources are increasingly being devoted to meeting compliance requirements, putting pressure on margins and impacting profitability. Some of the proposed changes could benefit certain businesses. Sanlam RSA is gearing resources and adapting by up‐scaling businesses that will benefit from these changes, implementing the right systems, growing relevant client bases and moving into umbrella funds that support smaller businesses. Sanlam will monitor progress towards the implementation of the BBBEE scorecard or the FSC once implemented.

Activities relating to the Financial Sector Charter Code

The FSC Code has been endorsed by Treasury and submitted to Minister Rob Davies for gazetting as a Sector Code. The targets for Empowerment Finance and Access to Financial Services and Products must still be determined by the FS Council. Sanlam is monitoring developments and will take appropriate actions. Johan van Zyl is a serving member of the charter council and will continue to engage with the process.