Back on track

Var­i­ous reg­u­la­tory changes were fi­nalised to give in­sur­ers greater cer­tainty

Finweek English Edition - - Focus on the life offices’ association (loa) -

IT HASN’T BEEN an easy ride of late for South Africa’s life in­sur­ance in­dus­try. An in­creas­ingly tough reg­u­la­tory regime, com­bined with a spate of rul­ings against life com­pa­nies by the Pen­sion Funds Ad­ju­di­ca­tor con­cern­ing early ter­mi­na­tion val­ues ap­plied to re­tire­ment an­nu­ity (RA) fund mem­bers, has dented con­sumer con­fi­dence in the in­dus­try.

In an at­tempt to im­prove its im­age with the in­vest­ing pub­lic and en­sure its con­tin­ued sus­tain­abil­ity, the in­dus­try – through the rep­re­sen­ta­tive Life Of­fices’ As­so­ci­a­tion (LOA) – and Fi­nance Min­is­ter Trevor Manuel signed a land­mark State­ment of In­tent agree­ment in De­cem­ber 2005, a R3bn en­hance­ment in pol­icy val­ues for cur­rent and for­mer pol­i­cy­hold­ers who had their fund val­ues re­duced for early ter­mi­na­tions or con­trac­tual “ad­just­ments” af­ter 1 Jan­uary 2001.

In its col­lec­tive State­ment of In­tent (SOI), the in­dus­try com­mit­ted to as­sist­ing pol­i­cy­hold­ers by guar­an­tee­ing qual­i­fy­ing mem­bers of RA funds and en­dow­ment pol­i­cy­hold­ers whose poli­cies are still on the books of in­sur­ers a min­i­mum value (See listed cri­te­ria on page 98).

While those in­vest­ment ve­hi­cles have his­tor­i­cally been one of the most im­por­tant sav­ings mech­a­nisms for South Africans sav­ing for re­tire­ment, their short­com­ing has been in the poor value they of­ten pro­vided to those mem­bers who weren’t able to main­tain their pre­mium pay­ments through­out the term of the in­vest­ment.

Ger­hard Jou­bert, CEO of the LOA, says that in ad­di­tion to com­mit­ments by in­sur­ers them­selves on the re­duc­tion of their own charges (as re­flected in the new min­i­mum val­ues) the min­i­mum value en­hance­ments were also un­der­pinned by a com­mit­ment by Gov­ern­ment to in­tro­duce a new com­mis­sion regime, which is likely to en­tail a bal­ance be­tween up­front and as-and-when com­mis­sion.

Says Jou­bert: “Since the sign­ing of the SOI we’ve been in­ter­act­ing closely with the var­i­ous in­ter­me­di­ary bod­ies, as well as Na­tional Trea­sury and the Fi­nan­cial Ser­vices Board, to en­sure that the new com­mis­sion struc­tures aren’t only af­ford­able to our pol­i­cy­hold­ers but also en­sure that our in­ter­me­di­aries have a vi­able in­come. In ad­di­tion, var­i­ous other reg­u­la­tory changes were fi­nalised to pro­vide in­sur­ers with greater reg­u­la­tory cer­tainty.”

Jou­bert says the aim now is to start ed­u­cat­ing con­sumers and pol­i­cy­hold­ers re­gard­ing the ef­fect of the new pro­tec­tive mea­sures, which aren’t only ret­ro­spec­tive but also have the ef­fect of lim­it­ing the re­duc­tion in val­ues for RA fund mem­bers and en­dow­ment pol­i­cy­hold­ers who aren’t in a po­si­tion to main­tain pre­mi­ums in fu­ture.

“As an in­dus­try we’ve recog­nised that changes in the eco­nomic and so­cial en­vi­ron­ment in SA mean that peo­ple tend to change jobs more fre­quently and get them­selves into short-term cash flow prob­lems, where they sim­ply can’t af­ford the pay­ments. So con­sumers need greater flex­i­bil­ity from re­tire­ment prod­ucts than in the past.”

The aim now is to start

ed­u­cat­ing con­sumers and pol­i­cy­hold­ers. Ger­hard Jou­bert

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