A recent FSCA Communication again stressed that “a provider must always act in accordance with section 2 of the General Code which requires that the provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.”
The Communication relates to a practice in the industry where records of advice on replacement products are prepopulated by certain financial institutions (prepopulated records) and made available to the industry. The FSCA is concerned about this practice, as various instances of incorrect advice, based on factual errors on the prepopulated records, were identified. “The net result is that clients are given advice based on incorrect comparisons of policy wording, fees, benefits and exclusions on prepopulated records,” according to the FSCA.
The Authority emphasises that the purpose of a record of advice in respect of a replacement product is to provide a client with a detailed, factual and accurate comparison of the existing product, with the proposed replacement product(s). It is therefore imperative that the information contained therein is accurate and that the client can rely on it. The accuracy of all information on prepopulated records should therefore always be confirmed.
Click here to download FSCA Communication 46 of 2020 (FAIS)
Replacements have always been a hugely contentious issue in the insurance industry, and, quite frankly, neither the old reporting system, nor the new one, did anything to curb abuse. The pre-population of documentation is, at best, a cynical practice which goes against the spirit of what the Authority intended it to do. It will be interesting to see whether any action will be taken against those involved in this practice.