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Moonstone Monitor - 31 August 2017 |
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Paul Kruger
Author/Editor |
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What some people mistake for the high cost of living is really the cost of
high living – Doug Larson |
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Distributed to 48,835 subscribers.
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From the Crow's Nest |
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Understanding Consequential Loss
by Staff Writer |
In a world that seems to constantly produce new forms of risk, it is
wise for the public to rely on insurance intermediaries to benefit from their
knowledge, experience and expertise, coupled with a good working relationship
with one or more insurers, to prevent unpleasant surprises at the time a claim
arises.
Even the most experienced advisers at times run into new scenarios which often
lead to a dispute on how the claim should be handled. One of these grey areas
concerns what is termed ‘consequential loss’ in the short-term insurance
industry.
BusinessDirectory defines consequential loss as: “Indirect loss which
accompanies an insured loss, such as loss of earnings resulting from a burnt
down business that was insured against fire. Consequential losses are not
covered by ordinary insurance policies, unless specifically included on payment
of additional premium.”
In commercial insurance, it could happen when a fire takes place at a warehouse
(the direct loss or damage) and the business, being unable to operate as a
result, loses its revenue (the consequential loss). In a scenario like this, the
business usually should have business interruption insurance in place to provide
for the consequential loss.
But questions often do arise about the consequential loss – particularly when it
comes to the car insurance sections of personal lines policies. For example, a
local insurance broker recently dealt with a claim that was repudiated by an
insurer on the grounds that the damage sustained to the insured’s vehicle was as
a result of consequential loss. In this instance the vehicle’s engine seized
because of loss of water from the radiator while the vehicle was driven
following an accident. The short-term insurance ombudsman ruled against the
insurer on the basis that it would not be fair and reasonable to expect the
insured to have the same knowledge and experience as that of a vehicle engineer.
Another tricky scenario played itself out earlier this year when Ford Kuga
vehicles caught fire as a result of mechanical failure. Mechanically, the issue
appeared to be insufficient cooling to prevent material warping of the engine’s
aluminium cylinder head, which cracked, leaking oil into a hot engine
compartment, resulting in fire. A number of insurers rejected these claims on
the basis of the exclusion of damage caused by mechanical failure. This means
that any consequence of the initial damage (in this case, fire) was not covered
in terms of the insurance policy.
But some insurers argued that the fire that resulted from the mechanical failure
itself should not be excluded because the fire was a consequential loss thereof.
In other words, the client is covered if the consequential loss (or damage) to
any other mechanical component of the vehicle is directly linked to the
functionality and working of the first breakdown (an insufficient cooling
system).
In scenarios like these, some short-term insurers may also refer to the
insured’s responsibility of ‘duty of care’. This means that a client (insured)
is obligated to take all reasonable steps to prevent loss or damage to their
vehicle. If the insured had furthermore applied the principles of ‘duty of care’
– in this case including taking the vehicle to the dealership to have the
defective parts inspected and replaced, the insurer may likely honour any claims
arising.
Issues around consequential loss are not necessarily easy to wrap one’s head
around. And the approach to it varies from insurer to insurer. However,
insurance intermediaries would really do well to understand the different
approaches thereof to ensure that their clients are adequately protected.
Perhaps this is a timely wake-up call to discuss your insurer’s approach to
consequential loss to ensure that you make provision for the possibility of such
an event occurring. |
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An authorised Financial Services Provider FSP no. 731. |
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Your Practice Made Perfect |
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Health Market Inquiry Update |
Investigations into the health market by the Competition Commission
appear to have hit a bit of a hitch.
A media statement confirmed that the “Revised Administrative Timeline”,
published on 1 December 2016 has been withdrawn and will be replaced
with a “Provisional Findings and Recommendations Report” on 30 November 2017.
Legalbrief today notes:
“…according to a
media statement announcing this last week, the team
conducting the inquiry will continue to ‘engage with stakeholders on
various matters’. In so doing, they may choose to: request information;
call for submissions; conduct consultations; hold discussion seminars;
and possibly even publish research reports.
While a deadline for completing the final document has yet to be
determined, it is clearly not going to be available this year.
It is not clear from last week’s announcement why it became necessary to
make yet another change to the timeline for an inquiry that began in
October 2015, when its terms of reference were gazetted. |
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Moonstone Regulatory Update Workshops 2017
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Please note: this is NOT
regulatory examination training.
The following topics will be covered by Billy Seyffert, COO Moonstone
Compliance, and Alan Holton, industry legal expert:
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A brief update on the RDR
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The proposed changes to the Long- and Short-term Insurance Regulations
and the impact on remuneration
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The proposed changes to the Policy Holder Protection Rules with a
focus on replacement business
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The Financial Intelligence Centre Amendment Act and how it impacts
Accountable Institutions
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The future of Fit and Proper and what will be expected of
intermediaries
The workshops are scheduled as follows:
Town |
Venue |
Date |
Port
Elizabeth |
PE
Golf Club |
05/09/2017 |
East
London |
EL Golf Club |
06/09/2017 |
Cape
Town |
The River Club |
11/09/2017 |
Johannesburg |
Houghton Golf Club |
19/09/2017 |
Pretoria |
Diep in die Berg |
20/09/2017 |
Durban |
Coastlands Hotel Umhlanga |
21/09/2017 |
Bloemfontein |
Kopano Nokeng |
27/09/2017 |
Click here for more details and to register.
CPD Points
Attendees who wish to apply for CPD points with their
industry bodies can request a certificate of attendance
after the event. This document will contain the required
information for such application.
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Unintended Consequences of NHI
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Research by economics consultancy Econex looked at the impact of
removing tax credits to medical schemes and then reallocating them to
funding National Health Insurance (NHI) as suggested by the 2017 White
Paper.
A report in Fin24 notes that tax credits are paid to principal members
of medical schemes to “reimburse” them for making use of private
healthcare. During 2014/15 the amount of tax credits paid to these
principal members was approximately R18.5bn.
During 2015/16 the total annual tax rebate paid to a principal member
without dependents came to R3 240. A rebate of R12 966 was paid to a
principal member with as much as four dependents.
Econex focused specifically on how the removal of the medical scheme tax
credits would make medical scheme membership unaffordable, if the
affordability threshold is 12.85% of income.
Findings
For the poorest 20% of medical scheme members, tax credit reduces
monthly contributions from R820.97 to R583.66. This reduces the
proportion of household income allocated to medical aids from 35% to
22.04%.
For the wealthiest 20% of medical scheme members, the tax credit reduces
the monthly contributions from R1 953.35 to R1 720.39. This reduces the
proportion of household income from 6.29% to 5.50%.
For the poorest 20% of beneficiaries, the tax credit reduces the cost of
medical scheme expenditure on average more than 40%. The cost reduction
is an average of 13.54% for the wealthiest beneficiaries.
Almost half (49.07%) of the poorest beneficiaries will move above the
affordability threshold, indicating that the poorer medical scheme
beneficiaries are impacted the most by the removal of tax credits.
These findings indicate that a lot more research is required before
proceeding with the NHI. It would make a lot more sense to address the
deterioration in public healthcare over the last decade than proceed
with a pie in the sky concept which has very little prospect of success.
Surely the immediate needs of the poor must carry more weight than a
badly assessed pipe dream? |
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Technologically Speaking
Moonstone Information Refinery |
The future of financial advice in SA |
The SuiteBox client engagement and support tool delivers video
meeting and digital signing capabilities to financial advisers.
Rapid advances in fintech provide a host of solutions that
streamline the delivery of financial advice, while driving customer
engagement, enhancing productivity, minimising costs and ensuring
workflow-embedded risk management and compliance.
Among the most exciting of these fintech solutions is
SuiteBox.
SuiteBox allows advisers and their clients to meet and discuss
financial solutions, whether document or web based, virtually, as if
in the same room. Contracts and agreements can further be signed
online with digital identity certification adding a layer of
validity to the transaction process.
"Not only can technology like
SuiteBox
improve and enhance client/adviser interaction, engagement and
capacity, it does so with adherence to the highest standards of
compliance, record keeping and cost effectiveness. Importantly, it
will free up the adviser to focus on delivering a quality advice
experience to his or her clients,” adds Hjalmar Bekker, Director of
Moonstone Information Refinery, SuiteBox distributor for Africa.
Click here to read more.
Suitebox Media contact
Neil Summers, Sales Manager, Moonstone Business Services
Mobile: +27729088994
Email:
neil@suitebox.com |
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Regulatory Examinations
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Frequently Asked Regulatory Exam
Questions |
1. |
What exam must I write?
Both the RE 5 and RE are Level One exams. RE 5 is for Representatives and
RE1 for Key Individuals. The RE 3 exam is for licence category II
candidates.
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2. |
How much does it cost?
The FSB determines the fee. Currently it costs R1163 per exam, also in
the case of a re-write.
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3. |
What preparation material is available?
Fully updated resources are available for those requiring access to the
legislation applicable to the regulatory examinations:
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Please make sure that you first read the
FSB’s Preparation Guide to
make sure you follow the right process in preparing. Page seven includes
a recent amendment to guide candidates in studying in the correct
manner. |
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Click on the following highlighted sections to download the relevant
updated Inseta learning material for key individuals,
RE 1, and
representatives,
RE 5. |
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LexisNexis provides a “Legislation Handbook” together with a
“Preparation Guide” containing the qualifying criteria, with a link to
the relevant legislation. |
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The
Juta FAIS Pocket Statutes also contains a CD with a comprehensive
list of updated supplementary legislative material for reference
purposes. Please click here to order this from our online shop. |
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The FSB’s telematics broadcast on the RE 1 and RE 5
provides a good introduction and overview, and can also be ordered
online in: |
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DVD format or on a
USB memory stick |
4. |
Where can I write?
Go to:
http://www.faisexam.co.za/show_venues |
5. |
What dates are available?
Go to:
http://www.faisexam.co.za/view_schedule |
6. |
What training is available?
As an Exam body we are not allowed to recommend companies that offer
face-to-face Regulatory exam classes. You can try Google for someone in
your area.
Bear in mind that this exam tests your knowledge about the laws
applicable to the provision of financial advice and intermediary
services. The questions are based on very specific qualifying criteria
set out in the FSB preparation guide. Any training that does not have
this as a basis will not prepare you properly for the exam. Do your own
research and don’t just accept what others say. |
7. |
Where can I buy old question papers?
There are no genuine “old question papers” available. Be very careful
when buying such preparation aids as some of those on offer are not in
line with the high standard prevailing in the actual exams and often
lead to a false sense of knowledge which is sadly exposed when
confronted by the actual exam. Follow the guidelines provided in the FSB
Preparation Guide and you are far more likely to achieve success. |
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Careers Platform
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Are you hiring? Advertise your position on Moonstone’s Career Platform
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The Moonstone website -
www.moonstone.co.za
- enjoys an average of 15 000 visits and approximately 39 000 page views per month. |
• |
Moonstone boasts an exclusive newsletter mailing list of over 48000
dedicated financial decision makers who receive 2 newsletters per week. |
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Our audience is relevant and industry specific: individual and corporate advisors and brokers in the following financial sectors:
Investment, Risk, Healthcare, Banking, Retirement, and Insurance. |
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Featured Positions |
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Short Term Commercial
and Domestic Sales Consultant:
Wealth Solutions Capital Insurance Brokers, Bedfordview - We are
looking for dynamic and energetic go getters for short term commercial
and personal lines insurance, as well as for Financial Advisers.
Read More
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Compliance Officer
under Supervision:
Moonstone Compliance, Johannesburg - The role will provide a
practical internship, during which the applicant will receive on the job
training and mentorship in the provision of outsourced compliance and
risk management services to clients in the financial services industry.
Read More
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Financial Advisors:
Odinfin, Irene, Pretoria - We are looking for insurance sales agents
to join our successful team.
Read More
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In Lighter Wyn |
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Short and sweet and finish en klaar |
Short and Sweet
Best wishes
Email from father to son: Treasure today son. It will be the
happiest day of your life.
Son: Thanks Dad, but the wedding is tomorrow.
Father: I know.
Trump and Hitler
"Trump's nothing like Hitler. There's no way he could write a book."
- Frankie Boyle.
Go Granny
My Grandmother is over eighty and still doesn't need glasses. Drinks
right out of the bottle – Henny Youngman.
Still going
My grandmother started walking five miles a day when she was sixty.
She's ninety-seven now, and we have no idea where she is - Ellen
DeGeneres.
Finish en Klaar
NHI in 10 years time?
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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
Disclaimer:
Services and products advertised by external product suppliers in
this newsletter are paid for by the respective suppliers. Moonstone
does not endorse any opinions, conclusions, data, products, services
or other information contained in this e-mail which is unrelated to
the official business of Moonstone and furthermore accepts no
liability in respect of the unauthorised use of its e-mail facility
or the sending of e-mail communications for other than strictly
business purposes.
The complete disclaimer can be accessed
here.
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©2015 Moonstone. All rights reserved. |