Notes on the Insurance Bill

The Insurance Bill in its probable final form has now been published. The Bill deals essentially in prudential matters as these apply to insurers.

However, there are a number of amendments to existing legislation proposed in the Bill that will be of interest to intermediaries.

Fees other than commission

S 8(5) of the STIA currently allows an intermediary to charge his client a fee over and above the commission earned from the insurer. This is permitted on condition that the amount so charged was disclosed expressly and separately to the policyholder by the intermediary.

This sub-section has been repealed and the repeal will come into effect once the Insurance Bill is signed into law. Instead, Regulation 5.10 to the STIA will govern this situation in future.

This Regulation provides that an independent intermediary or representative may only charge a policyholder a fee in addition to any remuneration otherwise permitted by Regulation if that fee –

(a) relates to an actual service provided to a policyholder;
(b) relates to a service other than services as intermediary;
(c) does not relate to any other service for which the independent intermediary has been remunerated by another person;
(d) is reasonable and commensurate with the service rendered; and
(e) the amount and purpose thereof have been explicitly agreed to by the policyholder in writing.

The Regulations, both LTIA and STIA now include a provision that remuneration paid to any person for the rendering of any service, activity or function performed by that person, must –

(a) be reasonably commensurate with the actual service, function or activity performed;
(b) not result in any service, function or activity being remunerated again;
(c) not be structured in a manner that may increase the risk of unfair outcomes for policyholders.

Premium collection

The Long-Term Insurance Act, 1998 will be amended by the inclusion of S47A – (Collection of premiums by intermediaries).

In terms of this new section, no independent intermediary may receive, hold or in any other manner deal with premiums payable under a long-term policy entered into or to be entered into with a long-term insurer and no such long-term insurer shall permit such independent intermediary to so receive, hold or in any other manner deal with such premiums –

(a) unless authorised to do so by the long-term insurer concerned as prescribed by regulation; and
(b) otherwise than in accordance with the regulations.

This new section has been added to align the LTIA with S 45 of the STIA, as previously there was no such provision in the LTIA.

The LTIA Regulations published for comment in December 2016 make no mention of this requirement and there is no similar provision in the LTIA Regulations as is found in S 4 of the STIA Regulations. It would thus seem that the draft LTIA Regulations will have to be amended to accommodate this new requirement.

S 49 of the LTIA and S 48 of the STIA (Limitation of remuneration) have both been amended to read as follows:

No consideration shall be –
(a) offered or provided by a (long/short-term) insurer or a person on behalf of a (long/short-term) insurer to an independent intermediary or any other person; or
(b) accepted by an independent intermediary or other person, for rendering services referred to in the regulations, other than commission or remuneration contemplated in the regulations and otherwise than in accordance with the regulations.

Each section has been split into (a) and (b) thus effectively dividing the section into prohibition on (a) offering certain remuneration and (b) accepting certain remuneration, other than as allowed for in the Regulations.

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