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PRESENTATION BY THE LOA TO THE PORTFOLIO COMMITTEE ON FINANCE

This presentation highlights the need for further consultation on the demarcation of health policies vs. medical scheme business and the role of the statutory actuary. It also discusses the implications of new s49A binder agreements and suggests effective regulatory tools to address conflicts of interest. Contact details provided for further inquiries.

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PRESENTATION BY THE LOA TO THE PORTFOLIO COMMITTEE ON FINANCE

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  1. PRESENTATION BY THE LOA TO THE PORTFOLIO COMMITTEE ON FINANCE INSURANCE LAWS AMENDMENT BILL, 2008 Title of Presentation

  2. 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

  3. 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

  4. 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

  5. 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 Title of Presentation

  6. 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

  7. 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

  8. THANK YOU - ANY QUESTIONS? • Contact details: • Anna Rosenberg • The Life Offices’ Association of South Africa • Deputy Executive: Legal & Policy  • (021) 421 2586 • anna@loa.co.za • Leanne Dewey – Convenor of the LOA Distribution Committee • Group Executive, Group Legal Services • Liberty Life • (011) 408 2540 • leanne.dewey@liberty.co.za • Gille Gehle - Member of the LOA Law Standing Committee • Chief Legal Advisor • Sanlam Life: Law Service • (021) 947 2543 • Gillie.gehle@sanlam..co.za Title of Presentation

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