Lion of Africa stands out as one of the most successful grassroots black empowerment businesses in SA.
"After 1990 it was clear that it was not going to be business as usual," says Lion of Africa CEO Adam Samie, "but neither the established white businesses nor the emerging black capitalist groups had a clear idea of the way forward.
WHAT IT MEANS
 It is a start-up BEE business; and
A leader in municipal and corporate lines
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"Some of the earlier initiatives were driven by apartheid thinking - that black businesses should be set up for black customers."
He says that short-term insurance businesses set up with the apartheid perspective, such as AfGen and First Central Insurance Brokers were doomed to failure. "There certainly wasn't a wealth of black expertise and experience for these companies to draw on.
"With hindsight, there was some naiveté initially shown, for example by Ismail Ayob at First Central, that a black company should automatically be entitled to business from the new government. Ismail felt that he was mounting an assault on the financial services sector on behalf of the struggle."
When Samie started Lion of Africa in 1999 he realised that he could not rely on customers supporting a black-owned business out of conscience and to "do the right thing". There was a perception (perhaps justified by the service experience from AfGen and First Central) that inevitably the service and delivery from a BEE company would be inferior to that of an established white business.
"I was always absolutely insistent that we would win business because we had better products and services, and not simply because we were black."
Samie also realised that it was not sensible to adopt a confrontational attitude to established businesses.
"In order to build a good business you need friends and to build partnerships."
Lion of Africa started as a joint venture between Guardian National and the Cape-based empowerment group Brimstone. Lion operated off the Guardian infrastructure, with the parent company handling the labour-intensive support functions such as claims and IT. It enabled Lion to start with a small core team, originally of just four people.
"Building a new business is like running a relay race and you rely on different people at different stages of the business life cycle. People who made a great contribution in the early entrepreneurial years - the kind of people who are happiest running their own businesses - were not as much at home as we grew (the staff is now 135 strong) and had to introduce more structures and stricter management controls."
Guardian was acquired by Santam in 2000 and Lion then started to use the Santam infrastructure. But over the past three years Lion has weaned itself off, taking over its own claims servicing last year and it will be fully independent on March 2007 when it implements the Sirius IT system and comes off the Santam mainframe.
The shareholding at Lion of Africa Insurance is now 39% Brimstone, 35% Santam and 26% Commlife, a holding company controlled by Brimstone executive director Fred Robertson.
"Brimstone and Commlife paid cash for their holdings and took all risks to their own account. There were no soft deals or special-purpose vehicles."
Commlife owns 100% of Lion of Africa's life, employee benefits and fund management businesses. "In due course we expect to get some benefit from offering life and short-term products to the same client base."
Samie says he never intended Lion to remain a niche operation - and certainly not to confine it to a black business and government niche.
"The short-term insurance industry has barely evolved in the past three decades. It has been selling the same product to the same people for years. We used to be at the forefront of product development - just look at Santam Multiplex, the world's first multicontract short-term policy covering household, motor and everything else in one policy. But in the sanctions era had stagnated and become a protected economy.
"I was convinced that there was an opportunity to operate insurance differently in an environment in which people and technology had changed."
"We are dealing with a much wider group of customers with different cultures and expectations. Sometimes even the brokers do not understand our products, let alone their clients. Consumer education is a big problem."
For the first five years Lion has aimed to establish to brokers that its products and services are at least as good as established players such as Mutual & Federal, SA Eagle and Santam.
"It was not a case of winning business by calling in favours or stealing accounts."
By slowly establishing its reputation as a competent outfit, Lion has become the largest underwriter of municipal business, the third-largest engineering underwriter and one of the top 10 commercial underwriters in SA. But it still has a lot of room for growth with an overall market share of just 3%.
Under finance director Charles Strickett is has adopted a conservative approach to financial management, in order not to jeopardise the solvency of the business in its early years; even now it remains primarily invested in cash and preference shares.
Samie, who was an executive with Guardian for most of his career, was never a great believer in the profitability of the personal lines market; the focus of the business was the commercial, corporate and municipal market.
He saw the key to growth as offering quality relevant advice to the market and to develop service standards to a higher level while offering good value for money.
"I do not believe that the market needs a revolutionary product. A bigger battle for us is to repair the insurance industry's reputation with customers to be view as more than just 'crooks in suits'.
"As a small business hungry for new business we are much more open to creating customised solutions than our much larger competitors. Our new IT platform will enable us to customise even deeper and faster."
Samie says he never considered fighting on price to be a sustainable growth strategy. "Of course insurance is price sensitive but if we build sound relationships with our brokers and our customers, they are not going to move business on price alone - and they will certainly give us the opportunity to improve our terms where necessary. But we will never move away from solid underwriting principles. Our profitability ratios make us industry leaders and we have a quality brand."
