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Wealth Management

Medical Schemes Commission and RDR

I recently received the following enquiry from a reader:

I was wondering if you have any thoughts on medical aid commission being regulated in a similar manner to the proposed RDR for long-term insurance.

As you know, we only receive 3%, capped at R75pm. We don’t see this as commission for the upfront advice and sale but our practice is geared to providing ongoing administrative assistance and advice. Is there anything on the cards to extend RDR into our space too?

The FSB’s Insurance Regulatory Seminar provided an update on RDR which seems to indicate that the Medical Schemes Council will still call the shots as far as commission on healthcare products are concerned, although, of course, you are also subject to FAIS and its subordinate regulations, and the associated costs.

One of the functions of the Financial Services Conduct Authority (FSCA – the new FSB) is to “…co-operate with the Council for Medical Schemes in the handling of matters of mutual interest.”

It appears that a similar relationship will exist with the National Credit Regulator, but here there is slightly more relevance:

The FSCA may not regulate and supervise credit agreements except with the concurrence of the NCR, but may regulate and supervise financial services provided in relation to a credit agreement.

I joined the industry shortly after Noah landed safely on Mount Ararat. One of the first things I learnt was the distinction between insurance (cover against something that may happen) and assurance (something that will happen).

If this still holds true today, it is not clear why the distinction is made between insurance and medical aid cover.

There is absolutely no difference between the advice and intermediary services provided by financial advisers in the two disciplines, which makes it difficult to understand why there should be such a vast difference in remuneration.

The recent furore after medical schemes announced their annual fee increases makes it abundantly clear that restricting adviser remuneration has little impact on the outcomes for clients. Where irregular payments were made, it should have been addressed at source by the authorities, not by depriving honest advisers of fair remuneration for their expertise and service.

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