Priority RDR Proposals

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The FSB proposes to implement the RDR proposals in three broad phases:

Phase 1: Changes to be effected within the existing regulatory framework, using existing subordinate legislative and administrative powers. These changes will be introduced either by amending existing subordinate regulatory instruments or issuing new instruments. The implementation window for such changes will be broadly between March 2015 and the effective date of the Financial Sector Regulation Act (“FSR Act”), currently anticipated to be in the second half of 2015.

Phase 2: Changes to be incorporated into the FSR Act itself, through conduct standards made under the FSR Act or through amendments to other items of primary legislation. The implementation window for such changes will be broadly between the effective date of the FSR Act and the effective date of the future overarching market conduct Act.

Phase 3: Longer term structural changes to be implemented once the overarching market conduct Act is in effect.

The following proposals were earmarked for Phase 1. The Regulator indicated that this is not a closed list, and other priority matters may be added, if deemed necessary.

  • Insurer tied advisers will be disallowed from advising on another insurer’s products.
  • Advisers may not act as representatives of more than one juristic intermediary (adviser firm).
  • Restricted outsourcing to financial advisers – certain functions will be permitted, including issuing insurance policy documents, but with certain limitations.
  • General product supplier responsibilities in relation to receiving and providing customer related data.
  • Commission to be prohibited on replacement life risk policies.
  • Commission regulation anomalies on legacy insurance products and enhanced standards for RA transfers.
  • Equivalence of reward to be reviewed as it appears that the current system discriminates in favour of tied agency schemes and hybrid models.
  • Remuneration for selling & servicing short-term insurance will be reviewed.
  • Conditions for short-term insurance cover cancellations to ensure that the best interests of clients are served.
  • Binder fees to non-mandated multi-tied intermediaries to be capped: Binder fees paid to intermediaries will be capped to ensure consistency of application, avoidance of conflict of interest and promotion of fair customer outcomes.
  • 5% Commission cap for credit life group schemes to be reduced to 7.5%.

We intend expanding on items in this list over the next few weeks to provide greater clarity on the rationale behind it, and what the proposals contain.