The Financial Sector Conduct Authority (FSCA) recently proposed amendments to the Policyholder Protection Rules made under the Long-Term Insurance Act, 2017 (LTIA PPRs) and the Short-term Insurance Act, 2017 (STIA PPRs) respectively.
The draft amendments have the main objective to give effect to certain enhancements to the 2017 PPRs, which were informed by supervisory findings on the implementation and compliance with the 2017 PPRs, as well as a number of regulatory and supervisory projects which were undertaken over the past few years. The proposed amendments are in line with the objective of the Financial Sector Regulation Act, 2017 (FSR Act), in particular the FSCA’s mandate to ensure the protection of financial customers.
The FSCA published a statement supporting the proposed amendments, which provides insights on the need for the proposed amendments to the PPRs. The proposed amendments are necessary to:
- Accommodate enhancements to the legislation, informed by supervisory findings and reports from several thematic reviews.
- Address gaps in the STIA PPRs and LTIA PPRs that allowed for regulatory arbitrage as identified through supervisory experience, including specifically in relation to life insurance policies underwritten under the funeral and risk classes of life insurance business.
- Expand the scope of the PPRs made under the STIA to explicitly apply to commercial lines business, and transpose the requirements in sections 51, 53 and 54 of the STIA to these PPRs, to align between the STIA PPRs and PPRs made under the LTIA.
- Provide clarity on areas of interpretational inconsistency and to correct minor drafting errors.
- Incorporate proposals emanating from policy developments.
In overview, there is a definite expansion of existing requirements in the PPRs to further mitigate conduct risks, with a clear focus on further strengthening regulation to ensure the fair treatment of clients. The amendments are further aimed at addressing risks identified around lack of governance and principles of product design. In addition, there are changes to address certain premium review practices, as well as a focus on the design of and disclosure of loyalty benefits.
Although these requirements are not directly applicable to Financial Service Providers and their representatives, it does provide insight to the concerns of the Regulator as well as possible changes which we may see in future, as further alignment is created between the insurance and financial services sector.
The full reasons informing the proposed amendments are set out in the Statement of need, expected impact and the intended operation which are published alongside the drafts, which can be downloaded below.
It is proposed that these amendments come into operation six months after the publication of the final notice setting out the amendments in the Gazette, following the completion of the consultation process. The FSCA acknowledged that the changes may require certain structural variations to products, processes, and systems of insurers, and have therefore proposed a transitional period as to allow insurers sufficient time to plan and implement the changes to ensure compliance with the requirements.
Comments on the proposed amendments and supporting documents, may be submitted in writing, using the comments template, on or before 10 September 2021 to the Financial Sector Conduct Authority, at FSCA.RFDStandards@fsca.co.za.
Download the documents by clicking on the links below:
- Statement of need, expected impact, and intended operation of the proposed changes to the PPRs July 2021
- Notice of amendments to LTIA PPRs July 2021
- Notice of amendments to STIA PPRs July 2021
- Tracked version of 2017 LTIA PPRs showing the proposed amendments
- Tracked version of 2017 STIA PPRs showing the proposed amendments
- Comments template for the draft amendments to the LTIA PPRs and STIA PPRs