At the conclusion of the Insurance Regulatory Seminar last year, Mr. Jonathan Dixon, Deputy Registrar of Insurance at the FSB, indicated that 2017 will be a year of substantial change.
The huge amount of information published as late as 28 December 2016 confirms this.
Over the last few years, a number of regulatory reform initiatives, focussed on conduct of business, were undertaken and consulted on. Certain of these reforms are necessary in the short-term, and cannot be delayed until Phase 2 of Twin Peaks, which will centralise all market conduct requirements in the Conduct of Financial Institutions (“CoFI”) Bill.
The regulatory conduct of business reforms will be implemented in two tranches during the course of 2016 and 2017. Tranche 1, scheduled between December 2016 and April 2017, will focus on reforms that can be brought about in the existing regulatory framework through the Regulations and PPRs.
Scope of Tranche 1
- the Retail Distribution Review, specifically the Status Update published on 13 December 2016 (“RDR Phase 1”);
- the Complaints Management Discussion Document and the Complaints Management Thematic Review published in October 2014 (“the Complaints Management Proposals”);
- draft amendments to the Binder Regulations that were published on 11 July 2014 for public comment until 1 September 2014, the finalisation of which was deferred until the publication of the detailed Retail Distribution Review Phase 1 proposals (“proposed Binder Regulations”);
- certain matters identified in the consultations on the Technical Report on the Consumer Credit Market in South Africa published on 3 July 2014, which signalled concerns with respect to consumer abuses in the consumer credit insurance market (“CCI proposals”);
- the draft Information Letter on Advertising, Brochures and Similar communications published on 13 December 2013 for comments by 28 February 2014 (“the Advertising IL”);
- appropriate minimum requirements for claims management (“Claims Management Proposals”);
- additional critical protections for policyholders and insureds identified through supervision (principles to inform premiums and premium reviews, minimum data governance requirements and negative option marketing and the like);
- alignment with the International Association of Insurance Supervisor’s Insurance Core Principles, specifically ICP 19;
- certain proposals of the Ombud for Long-term Insurance and the Ombud for Short-term Insurance relating to improved policyholder protection (“Ombuds proposals”);
- alignment, in certain respects, with the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002) (“FAIS Act alignment”); and
- closing of regulatory gaps identified in existing provisions, effect improvements to certain provisions and effect technical amendments to clarify the intent and purpose of certain provisions.
The Tranche 1 regulatory conduct of business reforms that will be given effect to through the PPRs relate to all of the reforms referred to above, save for the proposed Binder Regulations.
A further, more comprehensive review of the PPRs will form part of the broader review of all conduct of business legislative frameworks across the various sectors regulated by the Financial Sector Conduct Authority that will be undertaken over the next two or so years as part of Phase 2 of Twin Peaks and the development of the CoFI Bill.
It is proposed that the Tranche 1 regulatory conduct of business reforms will take effect on 1 May 2017, with appropriate transitional provisions where necessary.
Moonstone Compliance clients will be receiving detailed bulletins containing the need-to-know information contained in these proposals. We will also be conducting workshops later in the year.
Billy Seyffert, COO of Moonstone Compliance, cautions against over-reaction:
“Please remember that at present these are proposals for comment only, although in combination all of these provide a pretty clear vision of where the regulator is going. While clients should take cognisance and give due consideration to this information and continuously assess the impact, I want to caution against knee-jerk drastic steps based on proposed amendments. Once the final regulations are published, there will be sufficient transitional time to make the required adjustments.”
Fasten your seatbelts, and sharpen your pencils. This is going to be a very demanding year.