Insurance Sector Education and Training Authority (INSETA) on its development agenda

Meeting report

Opening Remarks
The Chairperson said that the backdrop of the meeting with Insurance Sector Education and Training Authority (INSETA) was to understand the administrative workings and the developmental impact of the SETAs. Members wanted to see if the work of the SETAs was in line with developmental objectives of the democratic dispensation.

INSETA Briefing
Ms Sharon Snell, Chief Operations Officer: INSETA, apologised that INSETA’s Chief Executive Officer was unable to attend the meeting due to illness. Members present were Mr Terence Berry (INSETA Council Member), Tumi Peele (INSETA Learnership Division) and Berna Botha from the outsourced company Deloitte and Touche.

Ms Snell explained that the INSETA’s purpose was to grow the pool and quality of scarce and critical skills in the insurance sector, thereby enhancing the sector and supporting the country’s transformation. The INSETA’s values included the need to partner and enable others to lead the industry with vision and deliver quality work. The entity had a highly esteemed reputation as being integral to the insurance sector’s growth. Ms Snell spoke briefly about the profile of the INSETA Council and the INSETA management.

The insurance sector formed part of a large and rapidly growing financial business services sector in the country. The insurance sector covered sub-sectors such as unit trusts, risk management, insurance and pension funds, life insurance, healthcare benefits administration, short term insurance and funeral insurance. More than half of the sector consists of women. The INSETA found that the field of insurance was growing fast and the number of people that were being employed was increasing all the time. An education profile of the insurance sector showed that the INSETA was working with a sector that was becoming very professional. It was rare to find people in the insurance sector that did not have any schooling or did not finish their primary education. Thirty four per cent of the people working in insurance had completed tertiary education and 57% had completed their secondary education. Employment growth in the sector has increased rapidly over the past five-year period. Statistics for 2007/08 showed that there were many black people employed in the sector (see presentation). There was a higher growth rate of black women being employed in the sector than white women.

Most insurance workers were focused in Gauteng and the Western Cape. Almost half of the workers in the sector lived in Gauteng. Other provinces accommodated only small components of the sector such as brokerages. These statistics were important, as they would help the INSETA to address youth unemployment.

The INSETA was established in terms of the Skills Development Act and was supposed to promote, facilitate and monitor education and skills development provision in the sector. The Minister awarded the INSETA an extended licence until 31 March 2011. The Act also allowed INSETA to monitor and evaluate employers Workplace Skills Plans (WSP), develop and implement the Insurance Sector Skills Plan (ISSP) within the framework of the National Skills Development Strategy, perform any function delegated by the Quality Council for Trades and Occupations (QCTO), and disburse skills development levies in the sector.

Ms Snell discussed the INSETA’s budget for 2010/11 which was drawn up on the basis of the levies that INSETA would receive. The income after the National Skills Fund (NSF) portion was removed amounted to R198 946 000. Interest and other income was added to this to show a total income of R214 330 000. The INSETA expected to pay, as a refund on 50% grant repayments to companies, a total of R113 150 000. Other expenditure would include administration costs and discretionary grant payments. This would bring the total expenditure to R214 330 000.

The INSETA submitted a Business Plan to the Department of Higher Education (DHET) in September 2009. As an organisation that had an expired license, the INSETA had to go through a re-licensing process. The entity saw it as an opportunity to re-position itself as a leading SETA through “massification” of service delivery and pioneering research. There was a negative perception of the INSETA Council and management due to negative publicity and poor governance issues. The INSETA decided to have open and honest communication on governance initiatives in order to build positive perceptions and trust. The structure of the INSETA would be reviewed so that the entity could be more prudent and efficient in the use of funds and resources. There was an increasing demand on discretionary grant funds. The INSETA would manage and prioritise discretionary grant spending focusing on sector priorities in respect of skills development. The INSETA feared that it would not meet its mandate to provide skills development opportunities that were supposed to be aligned with all provincial growth and development strategies. The entity was working with government departments to create a direct presence nationally (see Business Plan: Pg 8).

There had also been challenges within the INSETA. There had been a breakdown in trust between the Council and management, and there was poor support for projects that were proposed. The INSETA aimed to provide the Council with the technical understanding of the challenges of the SETA, including an understanding of government policy documents on skills development. The entity also wanted to explore opportunities to rebuild trust through open and transparent relationships. There were ongoing security breaches of confidential information to the media and other parties. The INSETA would implement a Code of Conduct confidentiality clause for the INSETA Council, management and staff to sign. There were delays in service delivery due to some critical functions being outsourced. There were also challenges with attracting and retaining appropriately qualified staff. The staff was not aware of the INSETA’s strategic plans. The entity saw this as an opportunity to involve the staff in planning and communicating the strategy to all levels of staff (see Business Plan: Pg 8).

A budget analysis of the 2009/10 financial year showed that the levy income was resilient despite global conditions and there was an 8% increase in levies received. Through close management of spending, the INSETA ended the year with an admin surplus of R3.4 million. The entity received their ninth unqualified audit report. The INSETA had allocated R5 627 940 to a Small Medium and Micro Enterprises (SMME) project, which would look at appointing regional advisers to support stakeholders in all the provinces. R1 652 750 would be allocated to a Career Guidance Project where career guides would be printed and distributed to learners in all schools in the nine provinces to promote insurance as a career. The INSETA would be partnering with the South African Actuaries Development Programme that would provide bursaries for potential black actuaries. R1 377 292 would be given to social development projects in order to support non government organisations (NGOs) and R26 588 600 would be put aside for bursaries and top ups. The INSETA hoped to reduce the high rate of unemployment among young people in 2010. Funding for internship programmes exposed unemployed graduates to the workplace and in turn increased their chances for employment. Bursaries would be given to unemployed graduates to create a talent pool for the sector.

Discussion
The Chairperson asked what the total value was of the insurance sector as a whole and how big it was in terms of market capital.

Mr Terence Berry, INSETA Councillor, answered that he was not sure about the insurance sector’s impact on market capital; however, the Johannesburg Stock Exchange (JSE) showed that eight or nine of the top twenty firms in the country were financial services companies, and a number of these were insurance companies. Financial services were the biggest contributor towards the country’s Gross Domestic Product (GDP). The insurance sector was a big economic driver. People thought that mining was the biggest contributor to the country’s economy, but it was actually investment banking and insurance.

Prof W James (DA) highlighted the giants in non-banking section of financial services. He noted that Liberty Life, Old Mutual and Sanlam were large contributors to market capital. So to answer the Chairperson’s question, the insurance sector contribution to market capital was massive.

Mr Terence Berry agreed that said that in terms of market capital, the mining industry was the largest due to resources, but in terms of economic activity, the financial services sector trumped other sectors.

Ms W Nelson (ANC) suggested that the vastness of their sector should have an impact on INSETA’s levy income.

Mr Berry replied that there was resilience in the financial services sector. The INSETA had anticipated a decrease in levy income; however, this did not happen. The sector had worked hard in not laying off people but rather held on to them and did without salary increases

The Chairperson clarified that the levy income amounted to R250 million roughly.

Mr Berry answered that there was no shortage of levy income in the sector. The challenge for the INSETA, as well as for most SETAs, was spending the money. There was a growing cash pile amongst SETAs and it was difficult to monitor the spending of the money.

The Chairperson wondered if the SETA was being led by the industry or led by the management structure. He asked what percentage of the industry was not paying levies?

Ms Snell said this was a difficult question to answer, as there was no data on companies that were non-levy paying companies. There was approximately 1400 levy paying companies in the sector that contributed to the total levy amount. There were many small brokerages and burial societies all over the country so it was difficult to assess them, as they fell outside the INSETA’s “catchment”. It was difficult to determine the number but it was far in excess of the levy-paying companies.

The Chairperson asked if it was possible that there was “another R200 million” in levies out there that were not being paid. If they had such a large market share, what did this mean in the context of levy support for sector development.

Ms Snell referring to the fact that the financial services sector provided one-fifth of GDP, reminded the Committee there were three SETAs covering the sector: BankSETA, FASSET and INSETA - so they were a third of that one-fifth. They believed that their revenue was complete and that 95% of the brokers were paying their levies. She asked Ms Botha to explain the steps they took to ensure their revenue was complete.

Ms Botha explained that the threshold for paying levy companies was a payroll of R500 000 or more. The South African Revenue Service (SARS) assisted with the collection of the levy income and determined and regulated who should be paying a skills levy.

Mr James said that looking at the full array of training needs, how much training did INSETA provide for the sector? How much of the funding was spent in the best interest of helping individuals to get into the business and for up-skilling?

Ms Snell commented that most of the R107 million went into training, ensuring that the ratios applying to gender and race were met. White males mainly dominate the small brokerage sector which only received 15% of the funds. Most of the money went to large companies that had black employees that could be trained in management and in scarce and critical skills.

Mr James pointed out that INSETA was an intermediate bureaucracy. He asked whether INSETA was satisfied that most of the money actually went into training and not into providing a fat bureaucracy. That is what worried the Committee. This assurance needed to be expressed in figures. If you were cash-rich and could not manage to spend your money, then one had a further problem. One could not spend the money in the private sector only. There had to be a vision of how one trains new people and especially black people and formerly disadvantaged people to get into that sector. Were they training and supporting the development of new entrepreneurs in the sector? How did a new person break into this sector since it was dominated by big companies?

Ms Snell explained that administration expenditure was restricted to 10%. They did not take administration expenditure out of the discretionary grant funding. More than half of it went to unemployed black people via learnerships and internships to learnership graduates. Bursaries were usually offered to in-service employees but they had now taken the step of offering bursaries to unemployed people in order to meet scarce and critical skill needs. The majority of the training is going to the right demographic group, to youth and to unemployed people. Insofar as new venture training is concerned, this is an area that has baffled the SETAs, to start something new you need huge amounts of capital which new venture do not have. They had looked at supplementary activites that you can start a new venture in such as small brokerages. However, you are never going to get a new insurance house via a new venture. New ventures had not been successful with INSETA. She said usually these new ventures failed before 12 months of being in the industry. New ventures were a burning problem in a lot of the SETAs and success depended on strategic partnerships.

Her colleague added that where a venture had succeeded was a franchise project that Sanlam and INSETA had set up that roped in employees who would otherwise have lost their jobs. However taking an unemployed person outside of the sector and setting them up in a new venture would not work. There were FAIS restrictions and problems with building clientele as clients wanted a person who was competent and experienced to manage their funds. Where ventures would work is with non-insurance related support services for insurance companies.

The Chairperson asked, of the R107 million of discretionary funding, what percentage went towards establishing partnerships with bigger, established institutions. What percentage of the discretionary money was channelled into this?

Ms Snell said this was very difficult to give an answer.

The Chairperson was not impressed that Ms Snell could not answer the question. He pointed out that the INSETA funding was split into mandatory funding, which meant that it went back to the companies that contributed the levies. Then there was the discretionary funding which should be channelled into a developmental strategy. What percentage of the discretionary money went to create partnerships with the established companies. Was the bulk of the discretionary funding also going to the established companies.

The reply was that it was 50:50. Half of the discretionary funding went to training unemployed people and bringing them into the sector via learnerships and half went to the training of employed learners in the companies.

Mr Berry clarified that the lion’s share of the discretionary funding went to learnerships, internships and bursaries. Part of it would go to levy-paying companies and part to unemployed learners.

The Chairperson clarified that even the bulk of the discretionary funding went to companies. This negated a developmental agenda. He understood insurance was a difficult industry as there was a high level of professionalism. But what was the developmental strategy for this sector? The strategy is to swim with the system and not to unpack and unbundle it. But we would park this for the meantime.

Ms Mushwana asked about the remote areas, how were they assisted? How did INSETA meet that plight? She wondered how INSETA was assisting in helping the country if most of the levy was being given to the companies.

Ms Snell replied that the big companies could easily take in people who were unemployed, train them and provide a qualification with 70% of them being employed. The challenge was that there were not many learners in rural areas that were being offered the opportunity to work in the insurance sector. One could find a broker but the broker did not have the capacity to take on a learnership. Also training providers were not prepared to go into rural areas to train people. That was why they were looking at a partnership to deliver a learnership with the FET colleges together with the small brokerages in the area. This would expand the capability of the small brokers in the rural areas to deliver learnerships. If one had a learnership product and the small brokers merely had to host the internship, this could work.

Ms Tumi Peele, Learnerships Manager: INSETA, added that with learnerships small brokerages were not able to provide the same amount and quality of exposure to work as the larger companies. Instead INSETA paid the small brokers to provide the internships after the learner had done a learnership at a larger company. Ideally, they were trying to spread quality training for all, whether in rural or urban surroundings.

She pointed out that the discretionary funding in this case did not go to the large companies but to the training providers. The training providers were accredited by INSETA to offer the qualifications. In response to a question, she said that the companies got to choose the training provider.
 
Ms Mushwana asked about the balancing of representivity not only in management – which appeared fine as it was representative of the demographics of the country - but of the INSETA Council too.

Mr Berry answered that the Council was not as representative as it should be. Each SETA council was made up of a 50:50 split between business and labour representation and one state representative. From a business view, representivity was good. The main issue was the labour representivity. This was from where most of the white representatives came. The black-white ratio for employers was 60:40. In terms of INSETA, there were seven white council representatives. This was a concern to the Council as well.

The Chairperson criticised the INSETA saying that its vision was to support transformation in the country. This was quite a loaded point. He wondered if this goal was affirmed in terms of the operations that they were currently engaged in, or if these operations were actually working against transformation. If the employer identifies the training provider, and even the catering, – is this empowered, is a new venture running in it? He wanted to know how the state money impacted the developmental trajectory. One had to use this to empower the disadvantaged. Nothing he had heard today spoke to that strategic intent.

Ms W Nelson (ANC) referred to the INSETA footprint of the Western Cape, Kwazulu Natal and Gauteng. There was no footprint in the other six provinces. Did INSETA have a strategic plan to address the rural areas? INSETA mentioned it was going into partnerships with FETs. How many FETs had been approached? Were there programmes? The learnerships were often used to provide companies with extra hands. She asked what monitoring mechanisms had they put in place to ensure that the internships were worthwhile and added value?

Ms Pelle said that since last year INSETA had visited FET colleges in Limpopo, Eastern Cape and the North West. Much as these provinces would like to partake in this venture, resources and infrastructure was inadequate as they did not offer insurance-related qualifications. Starting in 2011, there would be a project to capacity build the FET colleges to allow them to come on board to offer at least one insurance qualification. Bachelor of Commerce (BCom) lecturers were able to teach the courses without special training. They also looked at capacity building these lecturers to become assessors and moderators. INSETA would encourage the FET colleges to partner with the smaller training providers as they had the experience and expertise in insurance to mentor the assessors and moderators. They had had good response from them but the FET directorate had said that they would identify the colleges that would be ready to offer the qualification.

[Ms Snell said that for 2009/10 27 547 workers in the sector who completed learning programmes.]

Adding to the discretionary fund debate, Ms Nelson (ANC) said that getting into FETs and develop programmes, and not put it into existing channels, would represent meaningful change that this money was supposed to bring.

Mr S Makhubele (ANC) referred to the accredited service provider list given by INSETA, and said that nowhere did it state the company’s BEE status – this needed to be stated upfront. He questioned whether INSETA’s transformation targets had been met and whether progress was actually being seen. He also wondered how far they were with targets for people with disabilities. He said that it appeared that 60% of funding (mandatory plus discretionary) goes to the bigger companies. This was unfair bias. The smaller provinces have smaller brokers, what is INSETA doing about making the environment accessible to all. He asked about impact assessment analysis after training. He asked what INSETA had done about Recognition of Prior Learning (RPL). He suggested that career guidance for high schools should be more hands on and concentrate less on wasting paper and giving hand-outs to children which he noted they costed at R6 million. He echoed the need to make a serious dent in transformation progress.

Ms Snell said that SETAs as training authorities were required to deliver a standard of training. INSETA monitored the training providers and registered them if they met the requirements. They were a quality assurance body. They did not engage with them for the purposes of supply chain management and preferential procurement. The policy is to provide funds not to the training provider but to the employer company. The providers they engage with in terms of their policy were public FET colleges and public universities. If they wanted to do a customised programme for their bursary policy, INSETA would go to FET colleges and universities only. This was as a result of all the problems they had experienced with training providers (in terms of a SWOT analysis). They did not keep account of the BEE status of the accredited training providers.

The Chairperson was bothered by this and asked Ms S Snell again if they did not care to know the BEE status of the training provider.

Ms Snell replied that they did not have a prescription that an employer company must use a BEE training provider, INSETA prescribed that it must be an accredited training provider.

Mr Makhubele then asked, “When you talk transformation, what are you talking about?”

Ms Snell replied that INSETA’s transformation initiatives, of which there were many, did not extend in that measure. They provided bursaries on scarce and critical skills and there were a suite of training providers that a company could choose from. INSETA’s contribution to transformation was to ensure that the right demographics were trained, that black people were receiving management training, that women and people with disabilities were trained. For training initiatives and projects, INSETA gave preference to insurance companies that were BEE or an SMME company. They responded in this way to the insurance sector, not to training providers which fell under the ETDP SETA (Education, Training and Development Practices Sector Education and Training Authority).
 
Ms Snell spoke about the use of a RPL assessment for the FAIS qualification.

Ms Mushwana asked about the support of FET colleges in the smaller provinces.

Ms Pelu replied there were two in the North West that were ready to come on board. For the others, they want to deliver materials and make sure delivery is standardised for all to achieve equity.

The discussion returned again to the BEE status of training providers. Ms Snell explained that because they were an Education and Training Quality Assurance (ETQA) structure, they did not deal with the BEE status of these bodies.

The Chairperson asked Mr Win, the department legal advisor, if it was not necessary for a government entity to comply with the broad thrust of government policies. Mr Win agreed with the Chair. He said that looking at the skills development strategy and legislation, he believed that SETAs must ensure compliance with BEE and employment equity principles.

The Chairperson spoke of INSETA being a nice example of an “unqualified audit” yet it had a complete disregard of a developmental approach. How did INSETA empower black brokers? He said that the Committee needed to reflect on this submission based on the INSETA skills development vision. He highlighted that in the Accredited Service Providers list there was only one other province mentioned apart from the Western Cape, Kwazulu-Natal and Gauteng. He said there was obviously something wrong with the INSETA Council and management and he advised them to go over the list. No information was provided about provincial investment allocation and alignment in this regard had not happened.

He continued that other questions raised by members were not answered adequately. He asked for a breakdown of regional advisors and their demographic breakdown, the mandatory grants and the company beneficiaries in order of amount and their BEE status, the training providers BEE status and their value. On the discretionary funding side, the amounts given to and breakdown of public institutions and their programmes, of the R107 million. The value of the funding to each named employer organisation and their skills development status. Then on provincial allocation , how much was spent in each province, both mandatory and discretionary, the programmes and the status of the beneficiaries what is the strategy for the non levy paying companies, what was the programmes spent on them and what was the actual plan for this and the next financial year to support black brokers and non levy-paying entities

Further, on the matter of RPL, what capacitation processes were they putting into this. All this info INSETA should have to hand and should be provided to the Committee by 31 August.

The Chairperson said that this was the first instance of a government entity saying that it was not supposed to adhere to those skills development principles that driven by the transformation trajectory.

Prof W James (DA) said that he had a slightly different view. There was something about the architecture of the insurance business that the Committee had to understand and that was that opportunities for black individuals to get access to the business side was constrained by the scale of investment required. The SETA was not a venture capital firm. One could not place that burden on them. So the opportunities had to be in the area of brokerage. But what the link was between the SETAs, which fell under Higher Education, and individual entrepreneurship was a tricky question. He did not think that INSETA had failed in its development agenda, although they could certainly do better, but he would hate to see them leave being scolded.

The Chairperson said the issue here was if one wanted a growth trajectory, one could not rely on a trickle down effect. It had to be a development state’s perspective. The question had to be what had the SETA done to support the state’s interventions.

Mr Makhubele said that one could not claim not to be aware of what was going on. Whoever held the public purse, which was the SETA, had to know  the money went. Skilling was only one part.

Ms Mushwana said that the SETAs were responsible for the turnaround in the country and they could not appear before the Committee and say that they “don’t know”.

The Chairperson said there could not be a manager in the state disbursing money, saying that they were not interested in the patterns of ownership. There had to be proper empowering. Their issue was not about a bank or an insurance house having black ownership. The Committee’s interest was not in individuals having ownership. Its interest was how did this R250 million create the patterns of development and ownership and break from the past because this sector was one of the least transformed.

The Chairperson said that Parliament could enforce a turnaround strategy.

The meeting was adjourned.