Over the past few years, large corporations operating in Africa, have come up with innovative ways of redesigning financial products to cater for an increasing number of individuals unable to obtain services in more traditional ways. One of the most popular financial products has been Microinsurance, a product of the microfinance industry, which has for some time been aggressively marketed as essential – particularly for people in the informal sector – to provide a form of security, enabling people to manage their risks and prevent them from falling into poverty in the event of a crisis.
With the continued rise of mobile phone users in Africa, insurers have a huge opportunity to grow their revenue as they tap into this large consumer base – targeting the population in the middle of the economic pyramid – that does not live on less than $2 a day but cannot afford access to traditional insurance products.
Microinsurance has no doubt been beneficial to some SME’s (small and medium sized enterprises) and may be applauded as an innovative way of reaching a large proportion of people who previously relied on informal ways of managing their risks such as relying on the support of their family or their community. However, the drawbacks of this financial product and the lack of transparency by the companies that offer this mechanism of risk management need to be scrutinised. There have been concerns that microinsurance may not be quite what it seems.
The lack of transparency by some corporations means that more and more unscrupulous insurers are exploiting consumers who are unaccustomed to the concept of insuring their assets and income. There are already some insurers claiming to offer free insurance, who fail to inform consumers that their premiums are linked to product purchases such as mobile phone topup’s.
This deliberate choice by insurers not to disclose the truth to consumers is largely based on the assumption that most consumers will struggle to understand the insurance products being offered. They use marketing tactics that lead consumers to believe they are being offered free insurance. Questions need to be asked with regards to the way in which insurance products are being marketed in an unethical manner.
It may not be a stretch to suggest that because profits in the micro-insurance business are hard to come by as it requires large volumes of insurance contracts to make the business viable, companies are being less open and transparent about their insurance products particularly in some countries where regulation of the industry is not stringent.
While countries like South Africa, have made great strides in the regulation of the insurance industry to ensure customer confidence in the industry, by introducing a “Twin Peak” model of financial regulation aimed at addressing the shortcomings of the regulatory structure, other countries in Africa still have a long way to go.
Better regulatory practices need to be developed to deal with the risks of potential abuse in the insurance business. The regulatory models that currently exist in some countries in Africa are largely ineffective because of the slow law making process and unreliable judicial systems.
Rigorous reform of the insurance legal framework is needed in many countries across the continent as well as the establishment of independent regulatory institutions to ensure consumers are not vulnerable or exploited.
The present financial crisis has changed the way many law firms do business. With cut backs now being the order of the day in most industries including the legal sector, outsourcing has become one of the most popular cost-cutting measures. There is a shift in the legal landscape which has been taking place as far back as 2008, and is likely to benefit prospective employees, who can adapt to new ways of working in a technologically advanced competitive job market.
Connectivity through virtual workspaces, smart phones or networks, now enable virtual freelance paralegals to utilise the same methods and technologies as in-house staff. Work involving legal research, preparing arguments for court cases are now being outsourced. This has led to a demand in the services of contract workers (freelance), particularly from large corporations using contract lawyers to do work previously done by in-house staff.
This trend continues to grow especially in the US where multi-national companies are putting in place cost-saving measures by offshoring their work to countries in emerging markets with English legal systems. North America currently provides 65 percent of all outsourced work to India, Britain 20 percent and continental Europe 10 percent.
Despite concerns about the violation of client-attorney privilege, the popularity of this trend led to outsourcing seeing growth of about 40 to 60 percent between 2008 and 2009. The market for outsourcing has been booming in countries like India – now known as the worlds largest back office – where there is availability of English speaking US and UK graduates who are familiar with the common law environment.
Solo practitioners are also benefiting from cost-saving measures by utilising the services of freelance paralegals, allowing the practitioners to focus on building their law firms. The flexibility that this gives to those in solo practice means that they are able to balance their work and life. For most practitioners it’s a win-win situation.
The legal sector will continue to evolve as more legal services that require very little specialisation such as drafting documents and writing simple contracts – work previously done by junior lawyers – are outsourced to freelance paralegals. As economic problems persist in the western economies, demand for workers who are able to do “smart work” also known as knowledge processing outsourcing, will increase. Crisil a research house in India recently forecast in a report released this year, that outsourcing for knowledge intensive skills could triple to $5.5 by the end of 2015.
While some within the legal sector argue that this is a short term boom which will fizzle out as the western economies recover, the huge number of Graduates in emerging economies working for niche focused outsourcing providers, is a sign that outsourcing is here to stay.
Generalists in any field of work are usually under threat particularly in large corporations where demand for their services could instantaneously change in the light of technological and economic change. It is for this reason that most professionals particularly in the legal sector tend to specialise in certain areas of law.
While most generalists have the advantage of seeing the bigger picture, knowing a bit of everything without in depth knowledge of a specific area is often a disadvantage. Technological and economic changes have led to law becoming much more complex.
The emergence of new areas of practice such as environmental law, intellectual property, competition law and countless other fields means that clients seek legal practitioners with greater expertise. The present competitive market also makes it difficult for generalists setting up solo legal practices, to generate enough business that is profitable.
As markets continue to change with larger, merged organisations requiring specialised legal professionals, generalists who in most cases turn their hands to a diverse range of areas will be faced with numerous challenges.