Policyholder Protection RulesPolicyholder Protection Rules

AgendaAgenda

Overview of PPR Impact of PPR Key areas of concern

Legal ContextLegal Context

Long Term Insurance Act (01/99) Section 62 - Policyholder Protection

Rules Regulation = ease of change Bigger process - more regulation coming In particular:

Financial Advisory and Intermediary Services Bill

Purpose of RulesPurpose of Rules

“To enable a policyholder to make informed decisions in regard to long-term insurance products and to ensure that intermediaries and insurers conduct business honestly and fairly, and with due care and diligence”

Key AreasKey Areas

Disclosure by the Intermediary Disclosure by the Insurer Accreditation Requirements Mandate Role of the Compliance Officer

Important DefinitionsImportant Definitions

IntermediaryRefers to any representative or

independent intermediary Policyholder

Any prospective policyholder and individual members of a retirement annuity fund and preservation fund

Important DefinitionsImportant Definitions

Replacement PoliciesPolicy entered into by a policyholder ,

wholly or partially in replacement of any other policy.

Effective DateThe date of entering into , variation or

termination of any insurance transaction

Informed DecisionInformed Decision

In order to enable the policyholder to make an informed decision certain disclosures have to be made by :

The Intermediary at Contact Stage

The Insurer at Quote and Acceptance Stage

Rules of DisclosureRules of Disclosure

Both the Intermediary and Insurer has the onus of proving disclosure

Disclosure must be in: plain languageat the appropriate timeon any significant or material change

Disclosure by IntermediaryDisclosure by Intermediary

Disclosure by intermediary: At contact stage intermediary shall ensure at least

the following disclosures are made in writing/confirmed in writing, telefax or electronic:

statutory notice full names, title designation, addresses and

contact details legal status and confirmation of mandate details of relevant experience accreditation details whether he holds indemnity insurance any fee policyholder pays to intermediary

Disclosure by IntermediaryDisclosure by Intermediary

The Statutory Notice and a Template with the intermediary disclosures will be available on Charter Life’s Intermediary Website

Disclosure by InsurerDisclosure by Insurer

At Quote Stage the insurer has to make the following disclosures: Statutory notice

Registered name, addresses and contact details

Name and contact detail of compliance officer or department and complaints procedure

Claims procedure

Disclosure by InsurerDisclosure by Insurer

Name, class and type of policy

Benefit details- if investment, details on how value is determined

Premium detail and consequence of non-payment

Terms and conditions, guarantees, loadings, exclusions

Disclosure by InsurerDisclosure by Insurer

Amount of escalation in premiums for first 5 years and then on five-year basis (max. 20 yrs)

Minimum guaranteed values, surrender value, illustrative values in monetary terms

All assumptions i.r.o amounts and costs

Commission, charges and fees

Replacement consequences and cooling off

Disclosure by InsurerDisclosure by Insurer

Disclosure at Acceptance Stage : Any of above disclosures, if not made at

quote stage

Confirm any representations by/on behalf of policyholder which are material to risk assessment

Instances when benefits are to be provided and circumstances in which benefits are not provided

Rules on ReplacementRules on Replacement

Insurer/Intermediary must disclose potential implications, cost and consequences of replacement

Intermediary must ensure that application is identified as application for replacement policy

New insurer must notify previous insurer of replacement -no later than date of submission of application

Rules on ReplacementRules on Replacement Person who believes policy is replacement and

proper procedure not followed may lodge written complaint

New insurer must within 6 weeks, if satisfied that necessary, take disciplinary steps against intermediary, including reclaiming commission/remuneration terminating mandate

New insurer to offer client right of cancellation Findings and actions to be reported to

complainant and Registrar

Rules on Cancellations and Cooling-OffRules on Cancellations and Cooling-Off

30 day cooling-off period from receipt of summary : Where no benefit paid or claimed or insured event

occurred

Cancellation notice must be in writing

Premium refunded after deduction of cost for risk cover and market related investment losses

Insurer must comply with request not later than 60 days after effective date

Cancellation and Cooling-OffCancellation and Cooling-Off

Where policy can in law not be cancelled or by virtue of terms and nature not capable of being cancelled - fact to be disclosed to policyholder by intermediary/insurer BEFORE entering into insurance transaction in respect of the policy

Group Schemes and Fund PoliciesGroup Schemes and Fund Policies

Additional disclosures: Group Scheme

policy summary to all participating members of voluntary scheme

membership certificate issued to all members Fund Policy

fund policy delivered to principal officer, trustees within six months after effective date/commencement date

policy to include conditions relating to discontinuance

General RulesGeneral Rules

Duties of RegistrarMay take any steps deemed necessary

to inform policyholders/public of existence, ambit and meaning of these Rules

Copy of Rules to be readily available Issue non-binding guidelines and best

conduct directivesCompile annual compliance review and

submit to Advisory Committee

General RulesGeneral Rules

Non-compliance:Written complaint to be lodged to party

involved and if not resolved, to Registrar

Insurer/Intermediary to fully reply to complaint to Registrar if required

Registrar may require corrective steps

General RulesGeneral Rules

Waiver of Rights

NO WAIVER BY ANY POLICYHOLDER OF ANY RIGHT OR BENEFIT GRANTED BY THESE RULES WILL BE VALID

Additional RulesAdditional Rulesof Insurers and Intermediariesof Insurers and Intermediaries

Insurer must furnish intermediary with written mandate

Both insurer and intermediary must keep records of all disclosures made by them - must be kept for three years after maturity or termination of the policy

Copies of such disclosures to be provided to policyholder on request

Additional RulesAdditional Rulesof Insurers and Intermediariesof Insurers and Intermediaries

Insurer must insure that summary of policy reduced to written or printed form and issued to policyholder within 60 days

Claim: decision with regard to repudiation or quantum - claimant to be informed in writing of reasonsRepresentations to be made within 90

days

Additional RulesAdditional Rules

Within six months after coming into operation of Rules: Insurers must accredit intermediaries on

the products they may sell or service, based on “appropriate information and training”

Additional RulesAdditional Rules

Insurers must submit written report after end of every financial year on:steps taken to ensure complianceproblems experienced with

interpretation and implementation of Rules

summary of number and types of complaints

Additional RulesAdditional Rules

The practice of signing blank or uncompleted forms by a policyholder, whereby someone else fills in details at later stage, shall be an offence by the insurance parties in terms of these Rules

Direct marketingDirect marketing

Telesales personnel must disclose that they earn commission and amount thereof

As long as all disclosures are made, need not follow exact sequence of Rules.

Call must be voice-logged (and must be able to provide copy of voice-logging)

Full disclosure must be made in writing/electronic/telefax after telesale

Policy LoansPolicy Loans

Insurer must disclose interest at time of entering into loan if interest will fluctuate repayment arrangements

Annually:amount of loan in relation to value of policy and interest rate and changes

When loan is about to equal value of policy When benefits cease as result of loan = value

of policy

CessionCession

Insurer must disclose on receipt of notification: that cession is recordednature of cession: outright/securityname of cessionary

StatusStatus

The Rules were Gazetted on 23 February 2001:

Implementation - 1 July 2001

Accreditation - 1 January 2002

What has Charter Life done?What has Charter Life done?

Awareness campaigns

Intermediary Website

Training and Development

Accreditation

AccreditationAccreditation

The aim of Accreditation is to : Develop and monitor (database)

intermediaries knowledge in our products and systems

Assist intermediaries with their business decisions

Why is Accreditation necessary?Why is Accreditation necessary?

Legislation Increased Consumerism Press coverage of the industry Intermediary associations Professionalism

Accreditation ProcessAccreditation Process

Professionally Accredited:Charter Specific Accreditation Exams Mandate

Policyholder Protection RulesPolicyholder Protection Rules