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Replacing of a life risk policy – Call for comments on RPAR template

Based on the comments received through public consultation, the FSCA is of the view that the previous proposed template for the replacement advice record (RPAR) raised certain practical challenges for intermediaries and insurers and may not necessarily have been designed in such a way as to achieve the intended outcomes envisaged by Rule 19 of the Policy Protection Rules (Long Term Insurance) (PPRs).

As a result the FSCA published a revised RPAR template for commentary.

On 27 March 2019 the FSCA provided an update on the above –

The purpose of this Communication is to:

  • provide a status update on the development of a format for RPAR referred to in Rule 19.2.6 of the PPRs.
  • inform stakeholders that a revised draft of the RPAR has been published on the FSCA’s website for further public consultation; and
  • confirm that the FSCA does not intend to extend the period for compliance with Rule 19 of the PPRs and Regulation 3.9A of the Regulations made under the Long-term Insurance Act, 1998 beyond 1 July 2019.

What is Rule 19?

Rule 19 of the PPRs sets out the prerequisites for a long-term insurer when entering into an individual risk policy that constitutes a replacement as defined in the PPRs. In terms of Rule 19 an insurer must, prior to entering into an individual risk policy that constitutes a replacement, obtain a copy of the record of advice that the intermediary is required to provide to the policyholder in accordance with section 9(1)(d) of the FAIS General Code of Conduct and satisfy itself that the record complies with the disclosure requirements set out in section 8(1)(d) of the General Code. Rule 19.2.6 further provides that the FSCA may determine the format for the RPAR referred to in Rule 19.

What is the intended outcome of prescribing a consistent format for the RPAR?

It is to ensure that the comparison done by an intermediary between a replacement policy and a replaced policy:

  • is clearly and easily understood by the policyholder;
  • contains a concise analysis of the suitability of both the replacement and the replaced policy;
  • contains sufficient information regarding the replacement policy and the replaced policy to allow the policyholder to make an informed decision about the suitability and appropriateness of the respective policies; and
  • sets out clearly why the intermediary is of the view that the replacement policy would lead to more favourable outcomes for the policyholder.

Latest developments

The FSCA makes it very clear that it does not intend extending the period for compliance with Rule 19 of the PPRs and Regulation 3.9(A) of the Long-term Insurance Act beyond 1 July 2019.

Interested parties are invited to submit comments on the revised RPAR template in writing by 30 April 2019 to FSCA.INSRPARformat@FSCA.co.za.

Click here to download Insurance (LT) Notice 2 of 2019

Click here to download FSCA Communication 2 of 2019

Click here to download RPAR template.

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