Sunday, 21 December 2014

A sure way of getting nothing for something

(First Published in New Era Newspaper - 2 July 2014)

At the end of every month I enjoy going to one of the big casinos in Windhoek and trying out my luck on the machines. Sometimes I win a little, but most of the time I lose. While sitting there though, I have noticed quite a few people who seem to lose every time that I am there. These gamblers are quite vocal when they lose and loudly claim that the casino management is purposefully preventing “their” machine from winning. They believe that after all the money they have spent, they should be getting a return on their investment.
The dictionary defines gambling as “takin a risky action in the hope of a desired result”. In the case of a gambling house, the owners are sure they will get their money as there is only a certain percentage that actually gets paid out in winnings. This percentage of winnings and other legal aspects are controlled by the Ministry of Environment and Tourism through the Casino and Gambling Houses Act 32 of 1994.  
Most consumers throughout the world are aware that giving a businesses a “free-hand” will lead to them maximising their profits while giving as little bit as possible back the client. Thus in the case of casino’s, governments must put in place legislation to ensure that the gambler has a least a certain percentage chance of winning. (Of interest in the Namibian law, is that the law states “The Minister may designate any person in the employment of the Public Service as an inspector for the purposes of this Act”. Thus, technically any government employee could act as an inspector?)
Now back to the role of government regulation.
If we take the definition of gambling and we look at various business models we will notice that very often a business idea is a “risky action in the hope of a desired result”. Take life insurance: The life insurance company is taking the risk that should you die, they must pay you a certain amount of money even if the amount you have paid in does not yet equal that amount. This means, the company is taking your money in the hope that you actually live long enough to pay them more that the amount that they pay out on your death. The insurance company is of course working with a profit motive to make money for the owners so the company must do everything in their power to reduce the risk to get their own desired result – namely you should stay alive as long as possible. If the company finds it difficult to reduce your chances of dying, they must find other methods of reducing their risk.
Insurance companies thus spend a lot of time in risk management and putting in place agreements that will be of maximum benefit to themselves without scaring away their customers. Therefore most insurance companies have mechanisms in place to reduce the amount they have to pay out in the case the “desired result” in not in their favour.
Here too governments have to play their role an regulate the market to ensure the customer on the street is being benefitted in the manner they expected – especially as that customer is now no longer among the living to ensure the contract is upheld by the life insurance company. To this end the Government has created the Namibian Financial Institutions Supervisory Authority (NAMFISA). It operates under the auspices of the Ministry of Finance, and it has no profit motive.
I believe that taking out life insurance is not a gamble but a risk reduction factor in my planning of my financial matters. As a consumer, I must hope that the government through NAMFISA will ensure that my interested are looked after even when I am in my grave. Looking at the present capability and track record of the regulator, I wonder if it will be there for me against the insurance company?

Milton Louw is the IT Project Coordinator at the Electoral Commission of Namibia. This column is written in his personal capacity as a consumer activist and the views expressed in this column are his own.

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