Overview of proposed amendments to the Regulations and PPR s

Transcription

1 Overview f prpsed amendments t the Regulatins and PPR s Presentatin fr: 2016 Insurance Regulatry Framewrk Seminar By: J-Ann Ferreira Nvember 2016

2 Recap Amendments t LTIA/STIA Regulatins and PPRs will be given effect t in tw tranches Tranche 1: gives effect t certain cnduct f business regulatry refrms that cannt be deferred t the enactment f the prpsed CFI Bill Tranche 2: t ensure alignment with the Insurance Bill Slide 2

3 SCOPE OF TRANCHE 1 CHANGES Slide 3

4 Tranche 1 Tranche 1 amendments will include a number f cnduct f business refrms that can be given effect t within the existing regulatry framewrk, including: the Retail Distributin Review, specifically the Status Update: Retail Distributin Review Phase 1 published n 10 Nvember 2015 ( RDR Phase 1 ) the Cmplaints Management Discussin Dcument published in Octber 2014 and the Cmplaints Management Thematic Review published n 17 Octber ( the Cmplaints Management Prpsals ) draft amendments t the Binder Regulatins that were published n 11 July 2014 fr public cmment until 1 September 2014, the finalisatin f which was deferred until the publicatin f the detailed Retail Distributin Review Phase 1 prpsals ( prpsed Binder Regulatins ) Slide 4

5 Tranche 1 certain matters identified in the cnsultatins n the Technical Reprt n the Cnsumer Credit Insurance Market in Suth Africa published n 3 July 2014, which signalled cncerns with respect t cnsumer abuses in the cnsumer credit insurance market ( CCI prpsals ) the draft Infrmatin Letter n Advertising, Brchures and Similar cmmunicatins published n 13 December 2013 fr cmments by 28 February 2014 ( the Advertising IL ) apprpriate minimum requirements fr claims management ( Claims Management Prpsals ) additinal critical prtectins fr plicyhlders identified thrugh supervisin (principles t infrm premiums and premium reviews, minimum data gvernance requirements and negative ptin marketing and the like) Slide 5

6 Tranche 1 alignment with the Internatinal Assciatin f Insurance Supervisrs (IAIS) Insurance Cre Principles, Nvember 2015, specifically ICP 19 ( ICP 19 ) certain prpsals f the Ombud fr Lng-term Insurance and the Ombud fr Shrt-term Insurance relating t imprved plicyhlder prtectin ( Ombuds prpsals ) certain matters identified in the prpsed Declaratin f undesirable r irregular business practice Charging f fees by insurers in additin t premiums published in May 2014 ( Prpsed prhibitin n charging additinal fees ) alignment, in certain respects, with the Advisry and Intermediary Act, 2002 ( FAIS Act alignment ) Slide 6 clsing f regulatry gaps identified in existing prvisins, effect imprvements t certain prvisins and effect technical amendments t clarify the intent and purpse f certain prvisins

7 Tranche 1 APPROACH Nt intended t cnstitute a cmprehensive review f existing Regulatins PPRs added t significantly, but a further, mre cmprehensive review will frm part f the brader review f all CB legislative framewrks acrss varius sectrs regulated by the FSCA as part f Phase 2 f Twin Peaks and the develpment f the CFI Bill TIMING Tranche 1 refrms are planned t take effect in the 2 nd quarter f 2017, with apprpriate transitinal prvisins where necessary Envisaged that the Regulatins and PPRs will be prmulgated / made befre this date t affrd legal certainty - will in turn affrd insurers sufficient time t prepare fr implementatin Slide 7

8 TRANCHE 1 AMENDMENTS TO THE LTIA REGS Slide 8

9 Tranche 1: LTIA Regulatins Part 3A and 3B (Limitatin n remuneratin fr services as intermediary) has been amended t align the definitins f independent intermediary, representative and services as intermediary with that under the STIA regulatins regulate the extent t which representatives may prvide services in respect f anther insurer s plicies (Prpsal V f RDR Phase 1) regulate the payment f cmmissin in respect f risk replacement plicies (Prpsal OO f RDR Phase 1) recgnise that grup plicies may pay cmmissin in respect f whle f life risk plicies remve the 22.5% cmmissin payable in respect f credit life schemes with administrative wrk (Prpsal AAA f RDR Phase 1) update rates and amunts t reflect inflatin strengthen equivalence f reward prvisins (als refer t Prpsal RR f RDR Phase 1) Slide 9 Make Part 3B cmmissin regulatins applicable t variable premium increases n legacy investment prducts in the same manner as it applies t investment plicies entered int after 1 January 2009 (Prpsal PP f RDR Phase 1)

10 Tranche 1: LTIA Regulatins Part 3C (Limitatin n remuneratin fr utsurcing) has been intrduced t prvide that an insurer may pay a fee fr plicy data administratin services, defined as the managing, recrding and updating f plicy and plicyhlder data f an insurer n behalf f an insurer prvide that a persn may nly earn a plicy data administratin fee if it has the peratinal ability t ensure cmplete integratin with the IT system f the insurer prvide that the plicy data administratin fee may nt exceed 2% f premium prhibit the payment f a plicy data administratin fee t a representative that is a natural persn r a binder hlder if that binder hlder has a binder agreement with the insurer t perfrm the entering int, vary r renew functin (all f the afrementined are t give effect t Prpsals Z and AA f RDR Phase 1) intrduce caps n binder fees payable t financial advisrs (and their assciates) (Prpsal Z f RDR Phase 1). Exemptins pssible n gd cause shwn Part 3D (General principles fr determining remuneratin) has been intrduced t prvide general principles that apply t any remuneratin paid t an intermediary by an insurer fr rendering services as intermediary and under an utsurcing agreement (including a binder agreement) Slide 10

11 Tranche 1: LTIA Regulatins Part 4 (Limitatin n prvisins f certain plicies) has been amended t Slide 11 prvide fr equal treatment f fund member plicies and ther plicies entered int pstretirement in respect f the increases in incme drawdwn extend the grunds n which the full value f the plicy may be paid in the interest f plicyhlders prvide that an insurer may nly apply interest t the capital amunt f a lan under a plicy and nt t any ther cst r lss in respect f a lan prvide that where n interest is charged n a lan, an insurer may nt impse any fees, penalties r ther charges in respect f the lan in excess f an amunt equal t the maximum causal event charge permitted t be charged if the capital amunt f the lan had been a partial surrender Part 5A (Requirements and limitatins regarding the values and benefits f plicies) has been amended t prvide fr the prgressive reductin ver time f causal event charges n legacy cntractual savings plicies that any variable premium increase n r after 1 January 2018 in respect f a plicy t which Part 5A applies must be regarded as a separate plicy subject t Parts 3B and 5B

12 Tranche 1: LTIA Regulatins Part 5C (General principles fr calculating causal event charges) has been intrduced t prvide fr principles that insurers must apply when calculating causal event charges in the case f multiple causal events (largely incrprates the existing Directive 153.A.ii(LT)) Part 6 (Binder Agreements) has been amended t replace the definitins f assciate and underwriting manager t limit the ptential cnflicts f interest inherent in binder functin-related relatinships by extending the scpe f prhibited business relatinships Slide 12 require incidental activities t be addressed in binder agreements prhibit binder agreement with NMI s ther than fr the entering int, vary r renew and claims settlement activities require a binder hlder t prvide the insurer with timely, cmprehensive and reliable data t ensure that the insurer is able t cmply with any regulatry data management requirements impse gvernance, versight and recrd keeping requirements n insurers (this and the previus tw bullets give effect t Prpsal ZZ f RDR Phase 1) extend the matters fr which exemptins may be given

13 TRANCHE 1 AMENDMENTS TO THE STIA REGS Slide 13

14 Tranche 1: STIA Regulatins Part 1 (Interpretatin) has been amended t give effect t certain amendments effected t the STIA thrugh the FSLGAA, 2013 by intrducing definitins fr independent intermediary, services as intermediary and representative Part 2 (Calculatin f additinal amunts f assets) has been deleted as the ILAA, 2008 allwed fr capital requirements t be prescribed by the Registrar Part 5A (Limitatin n remuneratin fr intermediaries) has been amended t replace sectin 8(5) subject t additinal safeguards t prtect plicyhlders (sectin 8(5) was repealed by the FSLGAA but has nt yet been made effective) (Prpsal UU f RDR Phase 1) clarify that cmmissin is payable n grss premium, i.e. the premium as is payable by the plicyhlder Part 5B (Limitatin n remuneratin fr utsurcing), Part 5C (Principles fr determining any remuneratin) and Part 6 (Binder Agreements) have been intrduced r amended in a manner similar t crrespnding Parts in the LTIA Regulatins Slide 14

15 TRANCHE 1 AMENDMENTS TO THE LTIA PPRs Slide 15

16 NEW RULES Tranche 1: LTIA PPRs POLICIES AND PROCEDURES ON THE FAIR TREATMENT OF POLICYHOLDER The Rule impses certain general principles t be adhered t aimed at ensuring the fair treatment f plicyhlders The Rule is aligned t ICP 19.1 and 19.2 PRODUCT LINE DESIGN The Rule impses requirements n insurers when develping prducts Befre a new prduct is launched, sign-ff n bard level and a declaratin that the prduct, distributin methds and disclsure dcuments meet certain principles are required The Rule is aligned t ICP 19.3 CONSUMER CREDIT INSURANCE The Rule gives effect t certain CCI prpsals Slide 16 Requires an insurer t, where a plicyhlder exercises his/her right in terms f sectin 106(4)(a) f the Natinal Credit Act, assist the plicyhlder t cmply with any demands f a credit prvider under sectin 106(6) f the Natinal Credit Act r any relevant Credit Life Insurance Regulatins

17 NEW RULES Tranche 1: LTIA PPRs NEGATIVE OPTION SELECTION OF POLICY TERMS OR CONDITIONS & NEGATIVE OPTION MARKETING The Rule prhibits default selectin where ptins are available under a plicy (different terms r cnditins) The Rule affrds plicyhlders and ptential plicyhlder t whm insurers market plicies thrugh mbile phne vice r text messages the right t demand during r within a reasnable time after the messages that the insurers r persns acting n their behalf desist frm initiating any such further cmmunicatin Insurers r any persns acting n their behalf may als nt charge a fee r allw a mbile phne service prvider t charge a fee fr making a demand DETERMINING PREMIUMS The Rule requires that premiums must be reasnable and fair and that premiums must be inclusive f all csts Slide 17

18 NEW RULES Tranche 1: LTIA PPRs VOID PROVISION The Rule is intrduced t align with the current prvisins in the STIA PPRs CONSENT REQUIRED TO INSURE A LIFE The Rule requires that an insurer must btain cnsent frm a persn (lder that 18) befre insuring that persn s life ADVERTISING, BROCHURES OR SIMILAR COMMUNICATIONS The Rule gives effect t the draft Infrmatin Letter n Advertising, brchures r similar cmmunicatins Additinal prvisins have been included subsequent t cnsideratin f cmments received n the draft Infrmatin Letter DISCLOSURE, LANGUAGE AND RECORD KEEPING The Rule intrduces requirements relating t disclsure at pint f entering int a plicy (including timing, delivery and cntent f disclsures), n-ging disclsure, language and frmat f cmmunicatins t plicyhlders and recrd keeping Slide 18

19 NEW RULES Tranche 1: LTIA PPRs DATA MANAGEMENT The Rule requires an insurer t have an apprpriate data management framewrk and sufficient rganisatinal resurces and peratinal ability t ensure the data management framewrk is effective The Rule als requires that an insurer regularly reviews its data management framewrk and dcument changes theret ON-GOING REVIEW OF PRODUCT LINE PERFORMANCE The Rule requires that an insurer cntinually understand and mnitr its prducts, related distributin methds and disclsure dcuments PREMIUM REVIEWS The Rule intrduces requirements relating t premium reviews, including that reviews must be justified and reasnably balance the interests f the insurer and the reasnable benefit expectatins f its plicyhlders The Rule als prvides that reviews must be timeusly cmmunicated t plicyhlders Slide 19

20 NEW RULES Tranche 1: LTIA PPRs CLAIMS MANAGEMENT The Rule gives effect t the Claims Management Prpsals COMPLAINTS MANAGEMENT The Rule gives effect t the Cmplaints Management Prpsals REPLACEMENT OF POLICIES The Rule gives effect t Prpsal OO f RDR Phase 1 Links t the amendments t the Regulatins made in this regard TERMINATION OF POLICIES New Rule intrduced t align with the STIA PPRs (als refer t amendments under the STIA PPRs and Prpsal VV f RDR Phase 1) Specific requirements intrduced in respect f the terminatin f grup schemes Slide 20

21 AMENDMENTS TO EXISTING RULES Tranche 1: LTIA PPRs FUND POLICIES Amendments t the existing Rule relating t when a fund must receive the plicy has been prpsed t address the timeus disseminatin f infrmatin relating t a plicy COOLING-OFF RIGHTS The existing Rule relating t cling-ff rights has been amended t imprve readability ARRANGEMENTS WITH INTERMEDIARIES Rule amended t mre accurately align with the FAIS Act, give effect t Prpsal FF f RDR Phase 1 and incrprate certain mbuds prpsals POLICY LOANS AND CESSIONS Slide 21 Rule amended t imprve readability and t ensure that a plicyhlder knws where they stand ir the plicy value r benefits in respect f a ceded plicy

22 RULES NOT AMENDED Tranche 1: LTIA PPRs WAIVER OF RIGHTS SIGNING OF BLANK OR UNCOMPLETED FORMS Slide 22

23 RULES DELETED Tranche 1: LTIA PPRs ASSISTANCE BUSINESS GROUP SCHEMES There is n lnger a reasn t specifically prvide fr Assistance Business Grup Schemes. Specific requirements in respect f the terminatin f grup schemes have been intrduced in a separate Rule BASIC RULES FOR DIRECT MARKETERS Current requirements in this Rule have been incrprated int the prpsed amendments in varius places and will apply t all insurers Slide 23

24 TRANCHE 1 AMENDMENTS TO THE STIA PPRs Slide 24

25 NEW RULES Tranche 1: STIA PPRs New Rules similar t crrespnding Rules in the LTIA PPRs: POLICIES AND PROCEDURES ON THE FAIR TREATMENT OF POLICYHOLDERS PRODUCT LINE DESIGN CONSUMER CREDIT INSURANCE COOLING-OFF RIGHTS POLICY TERMS AND CONDITIONS DETERMINING PREMIUMS CONSENT REQUIRED TO INSURE A LIFE ADVERTISING, BROCHURES AND SIMILAR COMMUNICATIONS Slide 25 DISCLOSURE, LANGUAGE AND RECORD KEEPING

26 NEW RULES Tranche 1: STIA PPRs DATA MANAGEMENT ON-GOING REVIEW OF PRODUCT LINE PERFORMANCE PREMIUM REVIEWS CLAIMS MANAGEMENT COMPLAINTS MANAGEMENT Slide 26

27 AMENDMENTS TO EXISTING RULES Tranche 1: STIA PPRs Rules amended in a similar manner t crrespnding Rules in the LTIA PPRs: ARRANGEMENTS WITH INTERMEDIARIES TERMINATION OF POLICIES Slide 27

28 RULES NOT AMENDED Tranche 1: STIA PPRs VOID PROVISIONS WAIVER OF RIGHTS SIGNING OF BLANK OR UNCOMPLETED FORMS PERIODS OF GRACE Slide 28

29 RULES DELETED Tranche 1: STIA PPRs DEBIT ORDERS There is n lnger a need fr this Rule in the light f the new authenticated debit rder system that will be intrduced under the Natinal Payment System Act BASIC RULES FOR DIRECT MARKETERS Current requirements in this Rule have been incrprated int the prpsed amendments in varius places and will apply t all insurers Slide 29

30 TRANCHE 2 AMENDMENTS TO THE REGS & PPRs Slide 30

31 Tranche 2 Alignment with the Insurance Bill Will primarily fcus n alignment with the terminlgy used in the Insurance Bill alignment with the authrisatin classes (segmentatin) intrduced by the Insurance Bill accmmdating the transitinal perid f tw years within which registered insurers will have t apply fr re-licensing under the Insurance Bill Intrducing ther cnduct f business refrms In rder t facilitate the amendment f the Regulatins and PPRs t give effect t certain f the cnduct f business refrms, the LTIA and STIA must first be amended (thrugh Schedule 1 f the Insurance Bill) Necessary t ensure that the cnduct f business regulatry framewrk fr insurance remains rbust pending the enactment f the CFI Bill Slide 31 Sme f the current cnduct f business requirements in the LTIA and STIA will be repealed by Schedule 1 f the Insurance Bill and will be mved int the Regulatins and PPRs as part f the amendments t be made in Tranche 2

32 Tranche 2 TIMING Tranche 2 amendments t the Regulatins and PPRs will take effect n the date n which the Insurance Bill becmes effective CONSULTATION Cnsultatin in respect f the Tranche 2 amendments will take effect after the Bill is enacted but prir t cmmencement Slide 32

33 Questins?