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Demarcation Proposals Under Fire

The proposals by National Treasury to find a solution to what it regards as a threat to medical schemes did not find favour with all in the industry.

An article in the Financial Mail quoted a number of reactions from industry experts who felt that the retraction of the proposed ban on gap cover and restrictions on hospital cash plans did not go far enough.

Tiago de Carvalho, MD of gap cover firm Ambledown Financial Services, said:

“A 3% commission will discourage brokers from selling the product because the average gap cover premium is R100. He says a commission of 3% makes sense only to a broker selling medical aid, where the average premium is R1 000.”

Mike Settas, MD of gap cover company Xelus, commented on the proposed requirement that gap cover benefits must be defined in an amount before a client signs a contract with the insurer.

“This is an impractical aspect of the regulations. Predefined amounts linked to health events are an inefficient method of providing gap cover benefits.”

Heidi Kruger, on behalf of the Board of Healthcare Funders, said:

“While we believe that the concept of community rating [charging a uniform premium regardless of health risk and claims record] within the health insurance products covered by the short-term and long-term insurance acts is laudable, there may be unintended consequences in that the cost of gap cover and hospital cash plans may rise, thereby potentially increasing out-of-pocket expenditure.”

The SA Insurance Association (SAIA) says it has met treasury and the Financial Services Board to seek clarity on some errors in the regulations. It has also constituted an industry working group to formulate a position on the revised regulations.

“The SAIA welcomes the removal of the prohibition on gap cover, as it will allow consumers access to insurance policies that provide essential cover for charges over and above [what is] covered by medical schemes. This includes consumers who do not have the option to buy up or select [more comprehensive] medical scheme benefit options,” says Suzette Strydom, SAIA GM: legal.

To read the full article in the Financial Mail, please click here.

The FSB also published a very handy matrix to indicate which products fall under the Short-term Insurance Act, and which are governed by the Long-term Insurance Act. Please click here to download a copy of the Matrix.

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