1. LOA/SAIA Consumer Credit Insurance Enquiry LOA / SAIA Consumer Credit Insurance Enquiry 9 May 2008 PCOF briefing

2. LOA/SAIA Consumer Credit Insurance Enquiry Role of LOA LOA established 1935, fulfils role of industry representative and self-regulatory body for long-term insurance industry Promotes the interests of the industry and the insured public by:  promoting a better understanding of long-term insurance among the people of the country  Representing the industry and its policyholders in negotiations with authorities  Practising self-regulation “Forum where member offices can interact to promote their interests and those of future stakeholders.”

3. LOA/SAIA Consumer Credit Insurance Enquiry LOA members ABSA Life Ltd African Life Assurance Company Ltd Alexander Forbes Life Ltd Assupol Life AVBOB Mutual Assurance Society Capital Alliance Life Ltd Channel Life Ltd Clientele Life Assurance Co Ltd Constantia Life and Health Assurance Co Ltd Discovery Life Ltd Gen Re Hannover Life Reassurance African Ltd Hollard Life Assurance Company Ltd HTG Life Ltd Liberty Life Liberty Active Ltd Lion of Africa Insurance Company Ltd Medscheme Life Metropolitan Life Ltd Momentum Group Ltd Munich Reinsurance Co of Africa Ltd Nedgroup Life Assurance Company Ltd Nestlife Assurance Corporation Ltd New Era Life Insurance Co Ltd Old Mutual Life Assurance Co (SA) Ltd OUTsurance Life Insurance Company Ltd Pinnafrica Life Ltd Prosperity Insurance Co Ltd Professional Provident Society Insurance Company Ltd (PPS) Real People Insurance Company Ltd Regent Life Assurance Co Ltd Rentmeester Assurance Ltd RGA Reinsurance Co of SA Ltd Safrican Insurance Co Ltd Sage Life Ltd Sanlam Life Insurance Ltd Swiss Re Life & Health Southern Africa Ltd

4. LOA/SAIA Consumer Credit Insurance Enquiry LOA Code of Conduct Chapter 1Code on the Life Register Chapter 2Code on Demarcation: Health Insurance & Medical Schemes Chapter 3Code of Good Practice for Disability Insurance Chapter 4Code on Medical Requirements, Medical Report forms and related matters Chapter 5Code on dread disease benefits Chapter 6HIV Testing protocol Chapter 7Code on Replacement Chapter 8Code on S Reference system Chapter 9Code of Good Practice on Complaints Resolution Chapter 10Code on Equality Chapter 11Code on Half-yearly Statistics Chapter 12Code on Commission Control & interpretation of the Remuneration Regs Chapter 13Code on Public Relations and on Advertising and Promotion Chapter 14Code on Policy Quotations Chapter 15Code on Deferred Compensation Chapter 16Code on Short Term Investment Products Chapter 17Code on Claims Register Chapter 18Code on Intermediary Register Chapter 19Code on Assistance Business Chapter 20Code on Genetic Testing Chapter 21Code on Living Annuities Chapter 22Code on Unclaimed Benefits

5. LOA/SAIA Consumer Credit Insurance Enquiry New Business Figures – 2007 Individual Recurring Premiums (R’000) Ordinary Business 10 056 962 Retirement Annuities 1 477 522 Credit Life 970 425 Total Recurring Premiums 12 504 909

6. LOA/SAIA Consumer Credit Insurance Enquiry New Business Figures – 2007 Individual Recurring Polices: No of Policies Ordinary Business4 050 818 Retirement Annuities 260 428 Credit Life3 116432 Total recurring policies 7 427 678

7. What gave rise to this enquiry? Persistent rumours about commission non- compliance, no facts or formal complaints Highlighted in Personal Finance article LOA already concerned about aspects that may impact on value proposition, and steps taken to address aspects such as HIV exclusion clauses Initiated setting up of Panel of Enquiry & invited SAIA to join Mandate broader than just commission: anything that may impact negatively on the value proposition Hearings in October 2007, report finalised 2 weeks ago Recommends wider application of Zimele standards LOA/SAIA Consumer Credit Insurance Enquiry

8. Zimele standards Zimele standards: interprets the FSC “access” definition for life insurers Standards approved for funeral cover, life cover, physical impairment cover & also credit life cover Methodology based on fair Charges, easy Access and decent Terms (CAT) Credit life standards (Zimele folder) include: –Price caps: max monthly premium rates –Policy summaries available in dominant language –No HIV/AIDS exclusions applied at claims stage –Same rate applies to all policyholders of the same age at entry –Where exclusions are applied, standard wording –Physical access: inception & claims LOA/SAIA Consumer Credit Insurance Enquiry

10. Way forward – LOA LOA Credit Life Committee working with SAIA and others: initial recommendations to LOA board 29 May 2008 – firm proposals by 3 rd quarter 2008 Workshop with FinMark Trust – experts in this field Some provisional recommendations: Regular communication by the insurance company or credit provider to the client to increase awareness of cover (minimum standards?) Use of pre-existing conditions- medical questions at application stage should be defined into more specific disease related questions thereby removing all potential misunderstandings Extend the claim notification period- this will assist beneficiaries who only become aware of the policy at a later stage LOA/SAIA Consumer Credit Insurance Enquiry

11. Role of trade associations Self-regulation can work very well (e.g.Zimele) but trade associations much less effectiveness on competitive issues such as commission Also difficulties with sanctioning members & Competition Act Self-regulation should not play a major role regarding commission/incentives to intermediaries Consumer education major focus: lack of awareness of cover the major concern LOA/SAIA Consumer Credit Insurance Enquiry

12. LOA consumer education Since 2001 - 1/5 of annual subscription fees (HIV/AIDS in partnership with AIDS Law Project, assistance business, credit life & more) Mongi Mali – “save money” Government employees – R2.6 million (2006/2007) FSC Consumer Education (FSC: 0.2% of post-tax operating profits) –2006: R 1,3-million –2007: R10-million Trade associations play important role: credible source of information, co-authors of FSC consumer education standards Consumer education is key in this area: vulnerable consumers Need more focused programs (with SAIA)

13. LOA/SAIA Consumer Credit Insurance Enquiry Thank you