FSCA Communication 5 of 2019 (Insurance), recently published by the FSCA together with other related documents, contains the format for the replacement advice record (RPAR) in terms of Rule 19 of the Long-term Insurance Policyholder Protection Rules (PPRs) with an effective date of 1 September 2019.
The Communication provides a brief background on Rule 19 of the PPRs which sets out the prerequisites for a long-term insurer when entering into an individual risk policy that constitutes a replacement as defined in the PPRs. This Rule requires a long-term insurer, prior to entering into an individual risk policy that constitutes a replacement, to obtain a copy of the record of advice that the intermediary (representative of the FSP) is required to provide to the policyholder in accordance with section 9(1)(d) of the FAIS General Code of Conduct which specifically deals with advice in respect of a replacement, and satisfy itself that the record complies with the disclosure requirements relating to a replacement which are set out in section 8(1)(d) of the General Code. The Rule also allows the FSCA to determine the format for the RPAR.
The FSCA reminds insurers that they are expected to ensure compliance with Rule 19 and Regulation 3.9A by 1 September 2019 as no further extensions will be granted. Failure to comply with these requirements may result in regulatory action.
Although this Rule places a responsibility on the long-term insurer, it has an impact on advisors who provide advice to clients in respect of the replacement of individual risk policies as they will be required to submit the RPAR to the long-term insurer in the format prescribed by the FSCA.
The RPAR document published by the FSCA covers the areas which are set out in the General Code of Conduct and requires information about the:
- Replaced and replacement policy or policies;
- Reasons for recommending a replacement policy;
- Difference between the new policy and the replaced policy looking at the specific policy benefits and the general policy features; and
It also includes a Declaration by both the advisor and the policyholder.
Advisors are advised to familiarise themselves with this new format and ensure that they understand what is expected of them. If a long-term insurer is of the view that the information and disclosure requirements submitted by an advisor are inadequate, this could impact on the advisor’s remuneration.