The FSCA recently published two notices, FSCA INS Notice 1 of 2022 (short-term) and FSCA INS Notice 2 of 2022 (long-term), which extends the period of the exemption relating to direct collection of premiums by certain independent intermediaries and insurers, which was previously provided by FSCA INS Notice 1 of 2021 and FSCA INS Notice 2 of 2021. The 2021 exemption notices were set to expire on 31 January 2022, however the FSCA has now granted an extension for a further 12 months, until 31 January 2023.
The exemption notices allows for the payment of additional remuneration, outside of the maximum commission prescribed, for the purposes of direct collection of premiums, provided the conditions set out in the exemption notices are satisfied. The exemption allows for payment of remuneration in cases when premiums are collected directly into the account of an insurer, using the independent intermediary’s systems. An independent intermediary of this type conducts certain services in support of direct premium collection, which may be regarded as ‘accounting for premium’.
The FSCA communicated that the aim of extending the period of the exemption is to continue to accommodate the payment of additional remuneration over and above commission for direct collections activities, until further progress has been made regarding the amendments the FSCA is intending to propose to a premium collection framework, contained in the Regulations under the Short-term and Long-term Insurance Acts respectively. The 2022 Exemption Notices do not change any content that was contained in the 2021 Notices, and therefore still accommodate existing business practices a further opportunity to implement the necessary system and contractual changes to align their business practices with the evolving regulatory framework.
The FSCA also reiterated that undesirable practices in respect of the interest sharing model and other undesirable practices as communicated in FSCA Communication 22 of 2020 are not supported. All remuneration arrangements in this respect must be reasonable and commensurate with the direct collection services being performed, also taking into consideration the nature of the function and the systems required to perform such functions. The remuneration offered or paid may not result in the independent intermediary being remunerated more than once for performing a similar function in respect of the same policy on behalf of the insurer.
Compliance with the conditions of the exemption notices is critical for any insurer or independent intermediary using the exemption to justify the payment of remuneration for direct premium collection services.