Regulator Expectations regarding member contact details
When the Financial Sector Conduct Authority (FSCA) published Tranche 2 Amendments to the Policyholder Protection Rules (PPR) aligned to the principle of Treating Customers Fairly (TCF), it was noted by Michele Jennings, Chief Executive of Sanlam Group Risk (SGR), that these PPR’s will have far reaching implications for all group risk industry role-players [employers, funds managed by boards of trustees, retirement fund administrators (RFA’s), brokers & intermediaries, members and ultimately beneficiaries]. There were several areas that we anticipated would be challenging, and unfortunately these have subsequently materialised.
PPR 13 relating to Data Management, which includes the requirements for an Insurer to source member contact details, became effective on 1 January 2020. To assist insurers in fulfilling their regulatory requirement, policyholders have been required to also gather:
- Members’ contact details (phone/mobile and/or email);
- If spouse’s life insurance is applicable, members’ spouse details (names and ID numbers);
- If extended funeral insurance is applicable, members’ extended family details (names and ID numbers and relationship).
To collect and provide complete monthly member data (from the policyholder) to Sanlam, has proven difficult to achieve. How does the Regulator react when Insurers are unable to comply? And have expectations changed at all with the impact of unprecedented upheavals over the last 2 and more years? The following are some difficulties Insurers have when it comes to gathering data:
- Some role-players perceive that they do not have a legal obligation to provide the data to the insurer and/or are concerned about insurers duplicating information to members;
- There are insecurities & misunderstanding from members around confidentiality and the Protection of Personal Information Act (POPIA) and they fear that insurers may use contact information for nefarious purposes – instead of for the benefit of members;
- There are system changes required/system challenges experienced by some clients to be able to provide the data; and
- Difficulty is experienced by some clients (which has been hampered further by the pandemic) to obtain the data from their workforce and the information is not available to the employers themselves.
Our Experience
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. Despite our motivation that our communication to members is predominantly through a representative, there has been no leniency on this target. We have had to provide robust monthly feedback on our project plans and indicate the progress made in respect of any milestones and detail the efforts and initiatives to meet the compliance requirements. These included diverse initiatives, such as awareness campaigns (presentations, distributed newsletter articles directed at intermediaries, direct clients and distribution channels. We focussed on direct member engagement models, formal letters to stakeholders, sourced external project managers to focus on delivery, and introduced a more convenient digital member experience through an online portal to motivate the provision of contact details.
Despite our committed efforts, 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. Despite explaining the obstacles we have no control over, the FSCA has taken the hard-line and has intimated that schemes should be terminated if they have refused or not provided member contact details or given evidence of a written commitment to Sanlam that they will take responsibility for member insured benefits communication. They 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.
What are the implications for the industry on the Authority’s hardline stance?
- Factors outside of our control make it impractical and impossible for us to achieve our objectives. Role-players are experiencing their own limitations in terms of the information provided to them;
- Exemptions from the FSCA are hard to come by and will not be granted if doing so will amount to prejudicing the public interest or the achievement of the objectives of the PPR;
- We understand far too well the risks for us as an insurer when we are unable to achieve compliance. Apart from hefty fines and other punitive measures, the inability to write new business would be detrimental to our sustainability, our reputation and staff members, and we must take the necessary measures to ensure that we meet the targets set by the Authority;
- If the fund or employer is unable to provide Sanlam with the contact details of all members, another insurer would namely experience exactly the same problem. This creates a knock-on effect and would result in the unthinkable if a policyholder cannot secure risk cover for any of its members; and
- 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. Surely it cannot be the intention of the Authorities that the PPR’s must be complied with in such a manner that it leads to policyholders and ultimately members being prejudiced, thereby frustrating the purpose behind the rules.
The Regulator has made it abundantly clear the there is no lockdown for our PPR13 woes in sight. These requirements have placed enormous pressure on insurers and role-players alike. Now more than ever, we must collaborate and engage more robustly with each other in this industry – to keep our collective heads above water. Without new business and with terminations looming, the entire group risk industry suffers.
We need to continue to drive urgent initiatives to source member contact details from policyholders. We need to continue to rely heavily on our stakeholders to provide the assurance to members that they need not be unwilling to provide their details to Sanlam, as our intention is only to use the information to meet our regulatory obligations including TCF. The benefit is for them. Let’s educate our members. Let’s not shoot ourselves in the foot! Good luck to us all!
Warm regards,
Deolinda Delcarme