The African Regional Structure of the World Federation of Insurance Intermediaries (WFII) was represented this year by Justus van Pletzen, CEO of the Financial Intermediaries Association of Southern Africa (FIA) and Seamus Casserly, past president and dir
The 14th WFII World Council Meeting was held in Miami Florida from 16 to 18 March 2013. Established in 1999, the WFII is recognised by leading international bodies as the single voice of intermediaries in international public affairs.
Although the South African insurance market is small when compared to the rest of the world, making up just 1.14% of global business, it still ranks as the world’s 17th largest insurance market by premium volume (Swiss Re sigma No 3/2012). The local life insurance industry is the 14th largest in the world while non-life insurance occupies 19th place.
“A critical observation from the latest WFII gathering is that financial services intermediaries face similar challenges across the globe,” says Casserly. “The reason for this is that regulators are talking to one another via global associations such as the International Association of Insurance Supervisors (IAIS) where views are exchanged and policy guidelines and frameworks set”.
He added that it is important for South African intermediaries to be represented on the global platform in order to anticipate regulatory interventions and influence regulators on industry matters.
Matters discussed at this year’s World Council and Executive Committee meetings of the WFII included remuneration structures, especially in the life risk and investment space, and the on-going global trend towards comprehensive financial consumer protection.
“A number of European countries have already adopted a no commission approach with respect to intermediation in life risk and investment disciplines,” says Casserly. “One of the big debates brewing in South Africa is whether commission should be reined in or dropped in favour of a fee-based advice model”.
The remuneration debate hinges on redefining a number of industry definitions including advice, intermediary services and product sales along with appropriate ways to remunerate financial intermediaries for each of these activities. “I can assure local financial intermediaries that one of WFII’s core principles is that intermediaries are entitled to fair remuneration,” Casserly says.
The FIA has already made numerous representations to the Financial Services Board (FSB) with regards the pending Remuneration Distribution Review white paper, due later this year, and fully supports the WFII position on fair intermediary remuneration.
“Our position on remuneration is clear,” says Van Pletzen. “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”. He observes that a key element of adequate consumer protection is the value of independent financial advice to customers.
Another working principle of the WFII is the further liberalisation of insurance intermediary markets across the globe to the ultimate benefit of consumers. The principle is best understood from a short term commercial insurance perspective.
In a global economy many businesses have risk exposures in more than one country. While some risks are placed individually in local markets, others must be covered on a master policy which may include risks in multiple countries. Insurance intermediaries have to find the best coverage protection for their client’s risks with due consideration for different regulatory regimes.
“Whilst we respect the fact that countries protect their markets with different taxation and regulatory policies, the on-going liberalisation of insurance intermediary markets is something the WFII remains passionate about,” concludes Casserly.