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Investment Indicators - 2 October 2017 |
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Paul Kruger
Author/Editor |
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Stupid men are often capable of things the clever would not dare to
contemplate – Terry Pratchett |
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Distributed to 48,500 subscribers.
To advertise with us
click here |
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What if you could focus on doing what you love - looking after your
clients?
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Strategic Partner solution to:
- increase time with clients
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t. +27 (0) 10 597 6831
e. info@gtc.co.za
w. www.gtc.co.za
An authorised Financial Services Provider FSP no. 731 |
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| Rates Review |
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1. Secured Investment Rates |
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Please note that (G) indicates a Guaranteed and (L) a Linked product. In order to understand the difference between guaranteed and linked rates,
kindly click here for an explanation. |
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Company |
This Week |
Last Week |
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1Life (L) |
6.730% |
6.650% |
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2 |
Absa (L) |
6.597% |
6.511% |
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3 |
Assupol (G) |
6.000% |
5.950% |
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Company |
This Week |
Last Week |
| 1 |
1Life (L) |
6.730% |
6.650% |
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2 |
Absa (L) |
6.597% |
6.511% |
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3 |
Discovery (G) |
6.442% |
6.229% |
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2. Money Market Funds |
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Please bear in mind that our figures, though based on the actual quotations that you also use, are for information purposes only,
and can never replace the official quotation from the product house. In terms of the guarantees, you are requested
to clarify the exact extent of such guarantees with the product house prior to advising clients. |
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From the Crow's Nest |
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New steps to curb Churning
by Alan Holton |
The Retail Distribution Review (RDR) of 2014 contained several
comments that expressed concern about the negative effects of
“churning” which it described as “inappropriate or unnecessary
replacement of policies driven by intermediary incentives”.
For example, Proposal NN contains the observation that “Analysis of
the current distribution landscape has pointed to concerns about
up-front commission on replacement policies contributing to
incentive driven churn of life insurance risk policies. The risk of
inappropriate churn is sometimes exacerbated by substantial
recruitment incentives offered by long-term insurers for independent
intermediaries (using current terminology) to become tied advisers,
or for tied advisers to move between insurers.”
The latter concern, i.e. the substantial recruitment incentives
offered by long-term insurers, was effectively addressed with the
outlawing of sign-on bonuses.
Commission
A number of suggestions were made in terms of which replacement
policy commission was to be impacted. However, after industry input,
the December 2016 RDR Status Update advised that a commission
prohibition – or any other change in the commission model for
replacements – will be deferred until the overall final remuneration
model for life risk policies is settled. As an interim measure, the
method considered most effective for the prevention of churning is
to impose replacement monitoring obligations on the insurers
concerned.
The second draft of these amended Policyholder Protection Rules (PPRs)
was released for comment on 1 September 2017 and
contains specific provisions regarding replacing individual risk
policies. Comment from interested parties has to be submitted before
today, 2 October 2017.
New Insurer obligations
The new LTIA Policyholder Protection Rule 19 provides that, where an
intermediary renders any services as intermediary in respect of any
individual risk policy, the insurer, before entering into that
policy, must obtain confirmation from that intermediary as to
whether or not the policy to be entered into would constitute a
replacement policy.
In this regard, the word “replacement” has been defined in the Rule
and means the action or process of:
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substituting an individual risk policy (the "replaced policy"),
wholly or in part, with another individual risk policy (the
"replacement policy");
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the termination or variation of an individual risk policy (the
"replaced policy") and the entering into or variation of another
individual risk policy (the "replacement policy");
with the purpose of achieving the same or similar needs or
objectives of the policyholder or in anticipation of, or as a
consequence of, effecting the substitution or variation,
irrespective of the sequence of the occurrence of the transactions.
If an intermediary confirms that a policy to be entered into by
the insurer would constitute a replacement policy, the insurer must
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 (the replacement advice
record), unless the intermediary confirms that they did not provide
advice.
Then, no later than 14 days after receiving the replacement advice
record, the receiving insurer must provide the insurer of the replaced policy
with a copy of the replacement advice record.
In addition, a managing executive of the insurer or a person of
appropriate seniority to whom the managing executive has delegated
the responsibility must, no later than 14 days after receipt of the
replacement advice record, confirm in writing that the replacement
advice record complies with the disclosure requirements contained in
section 8(1)(d) of the General Code and that the replacement advice
record contains sufficient information regarding the replacement
policy and the replaced policy to indicate that the intermediary
took reasonable steps to satisfy himself or herself that the
replacement policy is more suitable to the policyholder's needs than
retaining or modifying the replaced policy.
This bears emphasis: the new insurer must be able to confirm in
writing that the intermediary actually took reasonable steps to
satisfy himself or herself that the replacement policy is more
suitable to the policyholder's needs than retaining or modifying the
replaced policy.
The Rule does not provide any detail as to whom the written
confirmation must be given to.
If at any time an insurer establishes that an intermediary has
failed to disclose to the insurer that a policy is a replacement
policy after the insurer request to the intermediary to provide such
confirmation, the insurer must report such non-disclosure to the
Registrar. The inclusion of this requirement in the Rule is an
indication of just how serious the Regulator is about stamping out
any possibility of churn.
In the event of such a failure by the intermediary, and if the
non-disclosure is established within a period of 6 months from the
date on which the insurer entered into the replacement policy, the
insurer must inform the policyholder that the policyholder may
cancel the replacement policy within a period of 31 days from the
date on which the policyholder is so notified.
Interestingly, the Rule now provides that the Registrar may
determine the format for a replacement advice record or other
notification required by this rule.
The provisions of Rule 19 must also be read with the proposed new
LTIA Regulation 3.9A which provides for commission payable under an
individual risk policy. This Regulation states that an insurer may
not pay any commission to any person in respect of a replacement
risk policy unless and until the confirmation referred to in rule 19
of the Policyholder Protection Rules, where required by that Rule,
has been provided.
Where the insurer has paid commission to a person in respect of a
replacement risk policy and the confirmation referred to in Rule 19
is not provided within the specified timeframes, the insurer must
reverse such payment and ensure that the payment is refunded.
It is strongly recommended that intermediaries who render services
in respect of individual risk policies read this Rule and Regulation
3.9.
Please remember the old saying: Ignorance of the law excuses no one. |
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| Your Practice Made Perfect |
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The Demise of Churning? |
Will the steps outlined above achieve the desired outcomes?
The good news is that the Regulator now understands that not all
replacements are bad.
One must question the rationale behind making the receiving insurer
accountable for assessing whether a replacement is justified or not,
given the enormous pressure from the top for production.
The requirement that “…a managing executive of the insurer or a person
of appropriate seniority to whom the managing executive has delegated
the responsibility…” must pass judgment on whether the replacement is
kosher is an indication that the Regulator wants to ensure
accountability. If the current practice of lip service to the existing
replacement documentation is continued, however, it is doomed from the
outset, unless this is physically supervised by means of visits to
insurers’ offices. Singling out advisers, rather than insurers, will
just be more of the current approach of treating symptoms rather than
establishing the root causes of problems.
Commission issues
The good news is that the initial proposal to ban commission on all
replacements was reversed, and will form part of the overall final
remuneration model for life risk policies. Some of the suggestions about
a possible remuneration model include a 50% upfront payment with the
balance paid on an as-and-when basis.
Billy Seyffert, COO of Moonstone Compliance and Risk Management, made an
interesting observation at the recent Moonstone Regulatory update
workshops. Advisers who operate mainly in the life risk policy area
should seriously consider reverting to at least a partial as-and-when
model. Apart from creating a more stable income over time, it also
provides your business with a tangible asset in the event of you wanting
to sell it.
Furthermore, it dilutes the impact of clawbacks, both in terms of
quantum and impact in a specific month.
As Mr Darwin said: It is not the strongest of the species that survives,
nor the most intelligent, but the one most responsive to change. |
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Medical scheme increases for 2018
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Fin24 published an interesting article on the subject:
Five medical schemes have announced their contribution increases for
2018. Genesis Medical Scheme is the lowest at 5.8% and Medshield the
highest at 10.9%.
Earlier this month, Discovery Health Medical scheme announced a weighted
contribution increase of 7.9% in member contributions for 2018, and
Bonitas Medical Scheme announced one of 8.7%. These relatively low
increases put other schemes under pressure to stay below the 10% mark,
but not all of them could do this.
Click here to read the full article. |
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Regulatory Examinations |
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Self-Help Guidelines to make a
booking, download your certificate or view results |
Candidates who wrote with Moonstone can now view their results,
make a new booking or update their information on our website:
www.faisexam.co.za
Here is what you do:
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Click on the
Moonstone FAIS Exam website (www.faisexam.co.za)
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Click on the
second heading: “Update Your Booking/Personal Details/Get
results”.
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Key in your ID or
Passport Number used to register for the exam: click on Send
password.
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The system will
send a password to the e-mail address you provided at
registration.
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Use this password
to log in on the same address as above:
Type in the password – do not copy and paste.
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Click login.
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You will then be able to make a booking, download your
certificate or view results.
Frequently Asked RE Questions
– Answers to questions on REs and preparation material
Email enquiries should be addressed to
faisexam@moonstoneinfo.co.za. You can phone us on
021 883 8000 - select option 2 to speak to one of our
consultants. |
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Careers Platform
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In Lighter Wyn |
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A meeting of two minds… |
A man was looking for a place to sit in a crowded university library.
There were very limited seating available, so he asked an attractive
young girl: "Do you mind if I sit beside you?"
The girl replied, in a loud voice: "NO, I DON'T WANT TO SPEND THE
NIGHT WITH YOU!"
All the people in the library started staring at the man, who was
deeply embarrassed and moved to another table.
After a couple of minutes, the girl walked quietly to the man's
table and said with a laugh: "I study psychology, and I know what a
man is thinking; I bet you felt embarrassed, right?"
The man responded in a loud voice: "$500 FOR ONE NIGHT? I`M NOT
PAYING YOU THAT MUCH!"
All the people in the library looked at the girl in shock.
The man whispered to her: "I study law, and I know how to nail
people”.
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Tel: +27 21 883 8000 | Fax: +27 21 883 8005
info@moonstoneinfo.com
www.moonstone.co.za
P.O. Box 12662, Die Boord, Stellenbosch, 7613, Republic of South Africa
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or the sending of e-mail communications for other than strictly
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The complete disclaimer can be accessed
here. |
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