1. SOUTH AFRICAN INSURANCE ASSOCIATION.
SOUTH AFRICAN INSURANCE ASSOCIATION
CENTENARY

2. Insurance Laws Amendment Bill Presentation to PCOF
Barry Scott – Chief Executive
Refilwe Moletsane – Deputy Executive

3. South African Insurance Association
Represents short-term insurance companies
53 members
Established 1907

4. Comments on Process Clause 4 of the Memorandum:
“The proposed amendments were made available for public comment for a period of 30 days”
Reality is that the Bill was received by industry just 2 weeks before submissions were due
“… consultations with affected industry participants prior to the submission of the Bill to Cabinet were also undertaken”
No such consultation took place with industry prior to the Bill being presented to Cabinet

5. SAIA Comments Technical changes: Policy changes: Auditors etc
Financial Condition Reporting
Medical Schemes Demarcation
S48 (binder issues)

6. Parallel Processes Nienaber enquiry into Consumer Credit Insurance
SAIA submission to Treasury on intermediary issues
Proposed National Treasury Discussion Paper on intermediary issues

7. “ACCIDENT AND HEALTH POLICY”
Current Act
definition of “A&H Policy” provides for -
OBJECTIVE exclusions
Intention of Bill
remove potential uncertainty
- whether products - governed under STIA / MSA
= removal of the criteria for the determination of -
“A&H Policy” in the current “Act”

8. “ACCIDENT AND HEALTH POLICY”
Concerns
Determination of “A&H Policy” within STIA
= subject MSA definition of -
“business of medical scheme”
= Interpretation of the Registrar of Medical Schemes
“Uncertainty” exist on product provided / proposed – within the ambit of MSA – application to Registrar of Short-term Insurance
Section 70(1)(A) – laudable – consultation process is limited to the Minister of Finance and Minister of Health.

9. “ACCIDENT AND HEALTH POLICY”
Concerns / Suggestions
Up-front definition of “A&H Policy”
Onus on Short Term Insurers to prove that they are not conducting “business of Medical Scheme”
Current products have been designed subject to the provisions of the current Act
Need for legal certainty within STIA
No need to refer to other legislation
Products “ STIA” will always be in contravention unless otherwise directed

10. “SECTION 48 OF STIA” Current “Act” Intended to regulate : Unclear :
process of entering into Binding Agreements
relationship between insurer, insured and intermediary with a “binder’
remuneration
Unclear :
Independent intermediary could bind an insurer
?UMA / entity with Binding Authority
Services specified = “Services as Intermediary”
Effects of FSB Interpretive note – Dec 1998

11. “PROPOSED SECTION 48 OF STIA”
SAIA Understanding : –
distinguish Independent Intermediaries who
act :-
- for the insurer ( Binder ) = earn fees
- for the insured = earn commission
separation of functions Intermediary who
offers : -
- “service as an intermediary”
- “other person” who may or may not be II performs additional functions – new sec 48 A

12. “CURRENT SEC 48 VS PROPOSED SEC 48”
“Services as Intermediary”
Proposed amendment –services of the insurer are paid by insurer and services in question are also remunerated for in terms of 48A binder or / regulated commission by the insurer
Not recognised :-
Intermediary who carries out functions on behalf of the insured and insurer = remunerated for one function

13. “PROPOSED SECTION 48”
Concerns
“Limited” to Independent Intermediaries
BUT – refer to remuneration paid to 48A
? Can this intermediary also perform sec 48A? = additional remuneration
Proposed provision fail to achieve clear separation of functions = NO clarification on “Services as an Intermediary” has been provided

14. “SPECIFIC CONCERNS OF PROPOSED SEC 48”
48 A(1)(a-e)
removal of distinction between
Underwriting Managers
Administrators and
Intermediaries with Binding Authority
No clarity as to how services listed in 48A(1) (a-e) interrelate to “ services as int” AND also in term of FAIS

15. “SPECIFIC CONCERNS OF PROPOSED SEC 48”
Section 48(2)(a-e)
Obligation of disclosure –prohibition 48(4)(c)
Prohibition delegation of function – proposal fails to recognise efficiencies = same should be authorised by insurer
Section 48(3)(a-c)
Prohibitions - ?
Additional amount to premium - Section 8(5)?
Can intermediaries earn same Section 8(5)?
Gross Premium?

16. “SPECIFIC CONCERNS OF PROPOSED SEC 48”
Section 48 3(a-e)
support for removal of profit share
BUT
Not on all binder agreements
Underwriting Managers – extension of insurer, provide specialised expertise and manage the financial soundness within a particular area of business. These entities who operate as though they are the insurer and can never be in a conflicted relationship = 48(3)(c)SHOULD not apply to such entities

17. “SPECIFIC CONCERNS OF PROPOSED SEC 48”
Section 48(4)(a-c)
Purpose of the prohibitions is understood- operational efficiencies created should be considered
?Non discretionary services – the link between intermediaries and administrations will not result in any conflict
Full disclosure = eliminate conflicts

18. “SPECIFIC CONCERNS OF PROPOSED SEC 48”
Section 48(5)(a-c)
“Owner of policies?”
Suggestions - Proposed Section 48
Distinction between
Underwriting Managers
Intermediaries with Binding Authority and type of business they can bind
Brokers without Binders

19. SOUTH AFRICAN INSURANCE ASSOCIATION
Thank you!