Industry Snippets

A lot has happened in the last week, and here is a snapshot of some of the more interesting developments.

FAIS Annual Report

News just to hand is a synopsis of the latest annual report from the office of the FAIS ombud Charles Pillai, and there were some interesting facts and figures:

Enquiries and non-justifiable complaints - 1836
Resolved files - 310
Pending files - 356
Referred to other forums - 1301
Total files received - 3806

Finally, the amount of money put back in the hands of the consumer was approximately R6.5m.

PFA's new interim ruling

And then the PFA stepped up to the plate again last week and issued an interim ruling in a matter involving the transfer out (prior to retirement age) of a retirement annuity fund to another retirement annuity fund.

The complainant wished to transfer his member's interest in the fund to another fund as he was not satisfied with what he alleges are poor investment returns achieved by the fund over the years.

The fund, relying on its rules which allow transfers out of the fund only in certain specified circumstances (none of which are applicable in this case) has turned down his request. The member then lodged a complaint with the adjudicator.

The Income Tax Act requires a Retirement Annuity Fund to have a rule which authorizes the transfer of a member's interest in the fund to another approved retirement annuity fund.

In light of the importance of the ruling (which will impact on all other retirement annuity fund members) the adjudicator, being of the view that registered funds are not only bound by their rules but also by relevant legislation like the Income Tax Act in this case and the common law, joined the South African Revenue Services and the Competition Commission as parties to the complaint.

According to the PFA the purpose for the joinder is for them to answer certain questions relating to the impact of the provisions of the Income Tax Act on fund rules which restrict transfers out of retirement annuity funds, and the applicability of the provisions of the Competition Act to the locking-in of retirement annuity fund members.

To say that any developments in this regard will be closely watched, is an understatement.

Short term - policy holders are under insured

And then it was the turn of one of the short term insurers, in an attempt to drum up business. Mutual and Federal says that some consumers have fallen into a prosperity trap and many policy-holders are under insured or lack cover, due to gaps in their all-risk provisions.

Mutual & Federal believes several years of low inflation have encouraged a feeling that lower prices reduce the need to review policy values.

Yet rising wages and economic growth have encouraged families to add to their possessions and invest in their properties. This should lead them to increase the sums insured but they often neglect to do so.

Merrick Oeschger at M&F says that one indicator of consumer-led growth should be additions or revisions to the specified items list in standard householder cover. However, this is not happening to anything like the extent one would expect.