In a media release on 21 May 2013, the Financial Services Board (FSB) announced that it had initiated regulatory action against Old Mutual for transgressions of Directive 159.A.i which applies to both the Long and Short Term Acts. This Directive sets out specific requirements for insurers who outsource an aspect of their business.
In another media release, dated 13 June 2013, it is announced that the FSB and Old Mutual have reached an agreement about prerequisites for Old Mutual’s outsourced broker consultant services (SERVCO model).
Old Mutual has engaged with the Registrar in a positive and constructive manner demonstrating its commitment to fair policyholder outcomes. A remedial plan has been agreed to by the Registrar and Old Mutual which will result in the SERVCO agreements being amended to give effect to the principles contained in the Directive.
No enforcement action in the form of a financial penalty will be instituted against Old Mutual in light of the technical nature of the breach and the cooperative manner in which Old Mutual has undertaken to immediately correct its SERVCO model.
The question has to be asked whether this sets a precedent for other transgressors.
Recently, Martindale Securities and Investments were fined R20 000 for not having policies in place for conflict of interest, risk management and business continuity. The media release on this matter stated:
The Registrar took into account a number of mitigating factors including amongst others: that the Respondent accepted full responsibility for the contravention, fully co-operated with the investigation and displayed sincere remorse for the contraventions, and remedied the contraventions.
The same mitigating circumstances were taken into account when Hippo Comparative Services were fined R1million in May this year.
We queried this with the FSB, and will share their response as soon as we receive it.