SIXTEEN months after the rollout
of the Default Insurance
Programme (DIP), about a third
of the market has chosen to
join the scheme instead of
posting bank guarantees.
Charmaine Brogden of
Jack and Seach Insurance
Brokers, the appointed agent to
administer the DIP on behalf of
insurer, Lloyd’s of London, says
the company has secured 33%
of the market. This is according
to figures provided by Iata
Johannesburg, she says, and
is up from around 22% in May
last year.
Some of the medium to large
South African agencies on the
scheme include Serendipity, XL,
HWT, Duma and Flight Specials.
Charmaine says the travel
industry has been asking for a
DIP-type product for more than
10 years. She says under Iata’s
Local Financial Criteria, which
was put in place in March last
year, massive bank guarantees
imposed on agents were a
particular concern for smaller
individually owned agencies as
these would encumber their
balance sheets and leave them
cash strapped.
While, initially, there were
some agencies that had joined
the scheme and also posted a
guarantee, Charmaine says all
these guarantees have since
been released back to agents.
Dinesh Naidoo, group
operations director of
Serendipity, says while he had
a guarantee in place when the
DIP was rolled out, he opted
into the scheme instead of
maintaining a guarantee. He
explains that he no longer has
to pay a yearly fee on a bank
guarantee and has also freed
up his cash flow.
Agents opting into the
scheme do not have to post
a guarantee, provided the
required guarantee does not
exceed R5m.
“In the case where the bank
guarantee value exceeds the
R5m DIP cover, Iata will request
the balance to be carried in
the form of bank guarantees,”
says Charmaine, adding that
she would like to see some of
the bigger agencies come on
board.
However, larger agencies that
are able to manage their cash
flow while posting the required
guarantee aren’t sold on the
scheme.
Garth Wolff, ceo of eTravel,
says he would rather post
the guarantee than join the
scheme, which requires agents
to pay per ticket. Neither
absorbing the cost into already
tight margins nor passing
the cost on to the consumer
is preferable to posting a
guarantee, he says.
