The Retail Distribution Review discussion document contains a number of proposals aimed at strengthening the regulation of premium collections by intermediaries on behalf of insurers.
This should not take one’s eyes off what the current regulations require.
The need for this was highlighted in a recent case which was referred to the Enforcement Committee of the Financial Services Board.
The referral relates to a contravention of section 45 of the Short-term Insurance Act, No. 53 of 1998, (STI Act), read with Regulation 4.1 of the Regulations under STI Act.
It was established that an insurer permitted 20 independent intermediaries to collect premiums in respect of short-term insurance policies underwritten by it without valid guarantees. This happened between July 2013 and June 2014.
As mitigating circumstances, the Registrar considered that the insurer accepted responsibility for the contravention, rectified the contravention by replacing the invalid guarantees with valid guarantees issued by a bank, and fully cooperated with the Registrar during the enforcement process.
Consequently, the Registrar agreed to a penalty of R200 000.
Please click here to download a copy of the EC Order.