Keeping a close watch on international intermediary trends
20 February 2014
Justus van Pletzen, FIA
Justus van Pletzen, CEO of the FIA.
The Financial Intermediaries Association of Southern Africa (FIA) is preparing for its participation in the World Federation of Insurance Intermediaries (WFII) 15th World Council and Executive CSE Committee meetings to be held in Sydney, Australia from 15 to 17 March 2014.
Justus van Pletzen, CEO of the FIA and Seamus Casserly, past president and director of the FIA and also the current chairman of the WFII will represent the Africa Regional Structure at this year’s event.
The FIA was among the founding members who launched the WFII in January 1999. Today the WFII represents over 400 000 insurance intermediaries from more than 100 national associations in more than 80 countries.
"The purpose of the WFII is to detect international trends in intermediary-related issues as well as to give policy direction to its members on current and future issues on the international agenda,” says Casserly. He adds that the principles and positions of the WFII are defined each year at the organisation’s World Council and Executive CSE Committee meetings. These principles then serve as guidelines for intermediary associations around the world.
More important is the organisation’s ability to influence global insurance regulators. As an advocacy group representing the interests of global insurance intermediaries the WFII is invited to provide inputs to the powerful International Association of Insurance Supervisors (IAIS). The IAIS represents more than 170 insurance ‘supervisors’ and is instrumental in debating and steering global insurance regulation.
"The WFII therefore creates an additional channel for the FIA to engage with its own market regulators,” says Casserly. "Jonathan Dixon, Deputy Executive Officer: Insurance at the (Financial Services Board) FSB, along with other FSB staff, is active in a number of the IAIS committees that are responsible for setting the rules that global insurance regulators abide by.”
Aside from structural regulatory impediments to cross border insurance trade it is likely that the US-introduced Foreign Account Tax Compliance Act (FATCA) will be under discussion at this year’s WFII gathering.
Member associations of the WFII have already engaged with the appropriate structures in their respective country markets to provide feedback on these issues. The FIA, for example, has discussed some of its concerns with the FSB in the hope that the regulator can use its position in the IAIS as well as its access to SARS and the DTi to ensure positive outcomes.
"The FIA’s participation in WFII structures ensures that we are kept up to date on the open exchange of information and the frank assessment of issues that are potential future drivers of change in the industry,” adds Van Pletzen. "It is important for South African intermediaries to be represented on the global platform in order to anticipate regulatory interventions and to inform their on-going discussions with local regulators.”
Remuneration structures in the life risk and investment space as well as the global trend towards comprehensive financial consumer protections will also feature on the WFII agenda. "A number of European countries have already adopted a no commission approach with respect to intermediation in the life risk and investment disciplines,” says Casserly. "Stakeholders in the South African financial services industry are still formulating a policy in this regard.”
The FSB is currently leading a comprehensive review of broker remuneration through its Retail Distribution Review (RDR) discussion paper. This review will redefine definitions including advice, intermediary services and product sales along with appropriate ways to remunerate financial intermediaries for each of these activities.
"The experiences of other country markets have informed our position on the remuneration issue and we will not support regulatory reform just for the sake of it,” says Van Pletzen. "The FIA will ensure that intermediaries are adequately remunerated for what they do, whether it is for advice-giving or related intermediary services.”
The FIA’s position on intermediary remuneration is clear. "Without the involvement of an intermediary no financial product will fulfil the purpose for which it is sold – so each sale must be accompanied by sound advice,” concludes Van Pletzen. "The value of independent financial advice to customers is a critical component for adequate consumer protection.”
The WFII is also tasked with the on-going liberalisation of insurance intermediary markets globally, to the ultimate benefit of consumers. They do so by focussing on the IAIS Core Insurance Principles, in particular those that lay down market conduct rules for intermediaries. South Africa is on track with its consumer protection responsibilities through the phased introduction of the FSB’s Treating Customers Fairly (TCF) regime and various other pro-consumer legislations.