presentation by the loa to the portfolio committee on finance
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Title of Presentation
PRESENTATION BY THE LOA TO THE
PORTFOLIO COMMITTEE ON
FINANCE
INSURANCE LAWS AMENDMENT BILL, 2008
PROCESS AND CONSULTATION
• This presentation will focus on issues of principle only, please refer to our written submission for drafting and technical comments
• However, we have not had sufficient time to consult and to prepare comprehensive comments
• We strongly believe further consultation is needed on various aspects
Title of Presentation
DEMARCATION OF HEALTH POLICIES vs MEDICAL SCHEME BUSINESS
• The LOA appreciates the complexities of this demarcation, but would prefer to see a more balanced legislative solution – particularly as demarcation between long-term insurers and medical schemes has not been an area of dispute for a number of years. • The definition of “health policy” is now, in effect, anything that is not the “business of a medical scheme” as defined in the Medical Schemes Act – the LTIA is rendered wholly subservient to the Medical Schemes Act (with its pending changes)
• Notwithstanding the proposed Minister of Finance powers, the long-term industry and Registrar will – now and in the future – be dependent on the outcome of negotiations regarding subordinate legislation, for demarcation clarity.
• In any event, it is important that any changes only apply prospectively so as not to impact on in force products.
Title of Presentation
ROLE OF THE STATUTORY ACTUARY
• The obligations to be imposed on the actuary to report possible future breaches of any part of the Act are too wide and exceed the actuary’s intended role and expertise
• The public officer already has a specific duty to ensure compliance with the Act in general
• Changes should be limited to those sections of the Act dealing with the insurer’s financial soundness
Title of Presentation
BINDER AGREEMENTS – NEW s49A
• Imported from the Short-term Insurance Act, but broader – implications require consultation for proper assessment of impact
• The LOA has no objection to the proposals relating to written agreements, clear scope of authority, no sub-delegation, no deductions from claims or premiums, improved disclosure and confirmation of insurer liability – insurers must remain accountable
• Proposals, as worded, re prohibition on profit sharing and legal relationships between entities may have unintended impacts on legitimate & beneficial arrangements
• Joint ventures and / or intra-group relationships can be effectively used to achieve
• Improved access to financial services• Lower cost products • Efficient and streamlined administration
BINDER AGREEMENTS – NEW s49A (cont.)
• Aspects of s49A go further than the harm sought to be addressed (mainly conflicts of interest)
• Further consultation is required to identify appropriate and effective regulatory tools to achieve this, such as– FAIS: s49A services fall within definition of
“intermediary services” - FAIS is already being amended to allow tougher regulation of conflicts of interest
– Policyholder Protection Rules - already govern assistance business group schemes, easy to expand
– Registrar’s current and proposed new enforcement powers
• Findings of the Consumer Credit Enquiry should also be considered – s49A could exacerbate identified regulatory confusion
BINDER AGREEMENTS – NEW s49A (cont.)
• It is not clear whether – (i) any one of the activities listed in s49A(1)
require a binder agreement, or– (ii) whether a binder agreement only applies
where a policy is actually entered into, varied or renewed by a third party on the insurer’s behalf (with or without the other activities)
• The current s48 of the STIA only regards (ii) as a binder agreement. If (i) is now intended, this significantly extends the scope of s49A
• We submit that s49A not be adopted in its current form, and offer the LOA’s support in seeking effective solutions to any identified market conduct abuses
Title of Presentation
THANK YOU - ANY QUESTIONS?
Contact details:
Anna Rosenberg The Life Offices’ Association of South AfricaDeputy Executive: Legal & Policy (021) 421 2586anna@loa.co.za
Leanne Dewey – Convenor of the LOA Distribution CommitteeGroup Executive, Group Legal ServicesLiberty Life(011) 408 2540leanne.dewey@liberty.co.za
Gille Gehle - Member of the LOA Law Standing Committee Chief Legal AdvisorSanlam Life: Law Service(021) 947 2543Gillie.gehle@sanlam..co.za
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