Forecasting 2024: regulatory changes

The financial industry finds itself at the nexus of anticipation and uncertainty. In the realm of regulations, the forthcoming year promises a canvas painted with both optimistic hues and potential challenges.

Beyond the regulatory landscape, unexplored territories beckon. As we peer into the future, it becomes imperative for industry players to not only navigate the present but also to forecast the winds of change. 

With this, FAnews spoke to Danny Joffe, Head of Legal at Hollard Insure to give us a picture or glimpse of what is likely or could transpire for the industry in 2024 - both positive and negative, from a regulatory perspective and how intermediaries can prepare and adapt for what’s to come? 

We still await clarity

It appears that the year 2023 was a year of slow regulatory change, according to Joffe, within the non-life market for both brokers and insurers. 

“Outside of the joint standard on IT Governance and Risk Management gazetted during November, we still await clarity about cyber resilience as well as all the issues that need to be covered by the Conduct of Financial Institutions Act (COFI), which is currently with the Treasury. A further draft will likely be released for comment in 2024,” he added.  

The release of COFI, Joffe said, is critical for the industry, as a lot of proposed conduct legislation has been held back by the regulator so it can all be included in COFI. “This includes the reclassification of non-life brokers into tied agents and independent intermediaries, the potential reclassification of collecting premiums into an outsourced service and the draft proposals made concerning amending the Policyholder Protection Rules (PPRs) (including all commercial policies into the PPRs).” 

“A comprehensive governance standard on outsourcing is also still being awaited together with final transformation requirements for financial institutions. So, once the new draft is received, it will be important to begin planning for the eventual finalisation of the Act. We need to remember that 2024 is an election year which may create further delays,” he added. 

More emphasis on other matters

There is also a much bigger emphasis, according to Joffe, on sustainability among responsible businesses today, and new requirements are being put in place for insurers to report comprehensively on climate change-related policies and risks, as well as Environmental, Social, and corporate Governance (ESG)-related policies and practices. 

“Suppliers to financial institutions will need to understand that they too will need to comply with the sustainability practices utilised by insurers, as well as the transformation requirements. I believe this will increase in 2024,” he said. 

On another note, Joffe said, “data protection and cyber threats are still a major risk in our economy, specifically in the financial sector where data and client bases are critical for sustainability and being able to do business. We already saw high-profile cyber-attacks in the financial services industry in 2023 and this will only increase in 2024.”  

“Finally, the advance in Artificial Intelligence (AI) has been unprecedented, not just in the insurance industry but all industries in the formal economy. We can expect the development in this area to become far more pronounced, and regulation is expected in AI both in South Africa, as well as the rest of the world,” he continued. 

Navigating these uncertain times

In his concluding remarks, Joffe said, “Intermediaries should begin preparing for COFI once it comes, so the impact is not that dramatic, as well as make sure they have the necessary safeguards on their IT systems to comply with the protection of their own and their client's data and to see how they can make artificial intelligence work for them as it will become more relevant.” 

Writer’s Thoughts

Intermediaries in the insurance industry must prepare for the changes that evolving regulations will bring. Ensuring compliance with new standards, safeguarding data, and exploring AI's potential should be top priorities, but is it easier said than done? Please comment below, interact with us on X at @fanews_online or email me.