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Final Insurance Conduct Regulations and Policyholder Protection Rules

We have become used to the publication of important regulatory changes on and after 15 December each year, but 2017 set a new “record” which will be hard to beat.

We will be sharing this information in small dosages so as not to scare you out of the industry with a leg(th)al overdose.

The draft Insurance Conduct Regulations and PPRs were tabled in Parliament on 2 November 2017. The period for Parliamentary review ended on 2 December 2017, and the final Regulations and Rules were published on 15 December 2017.

The Regulations and PPRs aim to deliver better customer outcomes across the financial sector and improve market conduct in the insurance industry by ensuring that appropriate products are provided to consumers.

The proposed reforms also address conduct of business risks and abuses that were identified through supervision. A more detailed review of the Regulations will form part of the broader review of all conduct of business legislative frameworks across the various sectors regulated by the future Financial Sector Conduct Authority as part of the Twin Peaks reforms.

Background to the Regulations and PPRs

The conduct of business reforms that will be given effect through the Regulations and PPRs relate to –

  • Phase 1 of the 2014 Retail Distribution Review (“RDR”) which proposes a number of improvements to how financial products are distributed and sold, including principles for remuneration of intermediaries to address conflicts of interest (especially those relating to advisors representing both insurers and the consumer), ensuring that insurers who outsource critical functions remain ultimately responsible for those functions, and curbing poor advice and intermediary practices.
  • Improvements to the requirements for binder agreements in support of the RDR which limit who may enter into a binder agreement, what sort of activity may be outsourced and what remuneration may be paid in a binder agreement, so as to address conflicts of interest.
  • Addressing identified concerns with respect to consumer abuses in the consumer credit insurance market. The amended Regulations and PPRs introduce alignment with planned dti Regulations dealing with caps on mandatory credit life premiums, as well as introducing a range of principles and requirements on fair treatment of policyholders that also apply to consumer credit insurance products.
  • Improving policyholder protection in the Ombud system by compelling the insurer to display Ombud information to policyholders, keeping records of complaints and requiring cooperation with the insurance Ombuds.
  • The introduction of requirements for claims management procedures, monitoring and analysis of complaints and the reporting of complaints information to the regulator and Ombuds.
  • Regulations on Advertising, Brochures and Similar designed to ensure fair and not-misleading communication with potential policyholders.
  • Appropriate minimum requirements for claims management.
  • Additional steps to ensure protection for policyholders, including principles to inform premiums and premium reviews, minimum data governance requirements and negative option marketing.
  • Alignment with international standards in terms of the International Association of Insurance Supervisor’s Insurance Core Principles.
  • Alignment, in certain respects, with the Financial Advisory and Intermediary Services Act, 2002.
  • Closing regulatory gaps and effecting technical improvements to clarify the intent and purpose of certain provisions.

The Regulations also introduce changes to the maximum causal event charges that apply to legacy contractual savings policies (entered into before January 2009) in the life insurance sector. The Regulations provide for the progressive reduction over time of the maximum penalty that can be charged when a legacy policy is lapsed, surrendered, transferred or the premium reduced.

Implementation timelines

The Regulations and PPRs will take effect from 1 January 2018 with transitional provisions provided for certain sections.

All the documents are available on the National Treasury’s website and the Financial Services Board’s website at

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