Re-focus on improving member outcomes
The “Covid years” have been exceptionally difficult for members, employers, intermediaries, and insurers. The most obvious challenges have resulted from the impact of Covid-19 on staff and families, and for insurers and intermediaries the additional challenge of coping with the high volumes and values of mortality claims. In addition to Covid challenges, insurers and intermediaries have also been adapting to the new or amended processes resulting from numerous regulatory changes.
Sanlam Group Risk has previously embarked on a communication strategy to share our insights and expectations on the Policyholder Protection Rules (PPR’s). There were several areas that we anticipated would be challenging, and unfortunately these have subsequently materialised.
As an example, PPR rule 11 (related to disclosure), requires that the insurer discloses all material matters to the policyholder and members, prior to commencement of the policy, during the lifetime of the policy and upon termination of the policy. Fortunately, we have largely been able to communicate through a representative of the insurer (the retirement fund administrator, fund, intermediary or employer), however we have faced numerous challenges in collecting the evidence from the representative proving that this was done.
A recent engagement with the FSCA has clarified that their expectation is that the insurer must obtain evidence to support that at least 90% of the members received or had sight of the relevant communication. The evidence can be in the form of an email (with a read receipt history), a presentation and attendance register (signed by members), or a signed acknowledgement of receipt by the member.
For the regulator this is particularly important when changing insurers, as members should be informed thereof at least 31 days before the change in terms of PPR rule 20, failing which the new insurer is obliged to defer the commencement date, potentially leaving members without cover for this period.
PPR rule 13 (relating to data management), has been difficult to achieve. A year after the regulation was effective, SGR had complete member data (name, identity number, contact number and email address) of approximately 60% of its members.
The regulator was dissatisfied with this progress and granted an additional year to reach a minimum of 90% complete data, and despite our motivation that our communication to members is predominantly through a representative, there has been no leniency on this target.
The FSCA has communicated to us that they would like to see “new initiatives to ensure a more robust approach to obtaining the required data”, and have mentioned onerous consequences if this is not achieved. They have agreed that terminating cover is a last resort and have recommended that to prevent the problem from getting larger, new schemes should not commence with the new insurer until the complete member data (including members’ contact details) is provided. This together with the onerous FICA requirements are expected to put a lot more pressure on intermediaries, employers, and insurers alike when joining a new insurer.
Many intermediaries have already indicated that the onerous onboarding requirements have resulted in limited movement of schemes between insurers, and combined with the risk that insurers may have to terminate existing non-compliant schemes because of looming regulator deadlines, members could be prejudiced by the loss of cover, poor service, or uncompetitive premiums- which is contrary to the financial industry’s drive to treat customers fairly and improve member outcomes.
Our best option to keep on track with this TCF drive, is therefore to work together with employers and intermediaries, and to be knowledgeable and prepared for the new regulatory compliant processes. In time it will inevitably become less onerous and more supportive of better member outcomes.