Just but the tip of the iceberg

28 October 2019 Myra Knoesen
Ms Muvhango Lukhaimane

Ms Muvhango Lukhaimane

In the years ahead, as legislative changes impact on the industry, it is expected that consumer protection will strengthen, and consumer confidence will increase. Insurers already appear to be paying more attention to servicing their policyholders and their complaints.

According to the Pension Funds Adjudicator’s 2018/19 Annual Report, complaints increased steadily to a record number.

New complaints received

Of the complaints, 11 399 new complaints were received, which is16.38% more than last year. Most disturbing is the fact that the bulk of the complaints have to do with non-compliance with section 13A of the Act and delay in payment of benefits.

“For an industry that prides itself as world class, with relative maturity, this is a grave indictment on our commitment to act in the best interest of members and acting in the spirit of Treating Customers Fairly (TCF),” said Ms Muvhango Lukhaimane, Pension Funds Adjudicator.

In many respects, non-compliance was concentrated in the large funds, i.e. umbrella funds, sectoral determination funds and industry funds. The non-compliance had to do with failure to collect the necessary contributions and failure to attempt to implement any enforcement measures against a non-compliant employer or responsible persons. Along with the failure to provide basic information to members e.g. benefit statements, the levels of non-compliance in these large funds put to question the policy considerations to consolidate funds as it is apparent that the more removed a fund and its administrators are from the ordinary member and employer, the less compliance there is to basic regulatory requirements.

Total complaints finalized

Gauteng continues to lead with the number of complaints. Apart from being the economic hub, the number of walk-in complaints underscore this statistic. KwaZulu-Natal remains second, with Limpopo and Mpumalanga tying third. The least number of complaints were received from the Northern Cape.

A total of 10 289 complaints were finalised, 16.81% more than the previous year. 8 234 complaints were finalised through the case management process and 2 055 were finalised at assessment stage by the New Complaints Unit.

5 319 complaints were determined, 20.75% up from last year; 1 932 were deemed out of jurisdiction, down 24.85% from last year; 2 405 complaints were settled, up 64.5% from last year; whilst 633 complaints were closed for other reasons, up 72.5% from last year.

Treating customers fairly

Funds and administrators are not faring well on TCF outcomes. According to Lukhaimane, compliance with the outcomes is proving to be a major problem for the pension funds industry.

73.83% of complaints received, relate to TCF outcome three. Complainants are often not provided with information relating to benefits, etc; sometimes they are provided with insufficient or incorrect information. 12.04% of complaints relate to TCF outcome 5a where complainants are dissatisfied with the performance of their products. This indicates that complainants are slowly becoming aware of the gap between expected/ promised performance and actual performance.

“Funds do not comply with minimum governance requirements, especially the provision of information to members. Members often do not get benefit statements and have no idea what they are entitled to, in terms of benefits. The situation is quite concerning. We do not have an enforcement mandate, and therefore, to a large extent look upon the FSCA to act on some of the issues that we report as pointing to systemic issues,” said Lukhaimane. 

“The concerns that you see on s13A are just but the tip of the iceberg – if you consider that commercial umbrella funds will not even bother to go through the entire process of recovering outstanding contributions in instances where the boards are selected by the sponsoring company with only one independent – they just liquidate the participation of a defaulting employer after sending out computer generated notices. It leaves a lot of work for the conduct authority to deal with,” continued Lukhaimane. 

The key role-player

Regulatory compliance is a very wide-reaching challenge that insurers, advisory practices, and brokers need to comply with. 

The nature of the relationship between all role players in the industry needs to fundamentally change so that the objectives of TCF are adhered to. Ultimately, this will result in a better relationship between insurers and policyholders. 

Editor’s Thoughts:
There is a role for every person to play when it comes to regulatory compliance. This is an opportunity for advisers to show their value beyond the normal services that they offer clients. Does the trend of complaints point to an industry that is not in good health as far as governance and its conduct is concerned? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts



Added by Hannes, 28 Oct 2019
Some more statistics would be handy. An analysis by province is basically meaningless as umbrella FSPs have a national footprint. My experience as Trustee on EB funds over 25 years has been the opposite to what this article refers to. My gripe is that less than 0.1% of members take even the basic interest in their retirement savings. They don't read benefit statements and during member information sessions only want to know the amount of funeral cover or whether they can access the funds in their fund. So if members had a meaningful interest in their pension funds and asked the difficult questions, FSPs will find it difficult to get by with poor service delivery and will exceed the f in tcf by striving to e! Excellence! But maybe the article is true for many small funds and my experience on 3000 plus member funds is not the norm. Although the one fund I am involved in has less than 500 members and service delivery by the administrator is still excellent!
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Added by Alan, 28 Oct 2019
In terms of the CoFI Bill, pension fund administration is an activity will have to be licensed under that legislation once it becomes effective. Then we shall see administrators having to comply with very specific TFC Conduct Standards
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Added by Ben Holtzhausen, 28 Oct 2019
Like so many other issues, this is just another where so much is said about the symptoms, but so little is done to determine the cause.

Here are a few points for the industry to ponder on.
1.) In far too many cases the employer and/or appointed benefit consultant (intermediary, broker etc.) is very nonchalant about the management and servicing of the fund. In many cases an employer sponsored fund is nothing more than a passive income cash-cow for the intermediary and is mainly utilised as a source to write individual business from.
2.) Several insurers encourage this behavior since quality intermediary support is often limited to those who produce large volumes of new business.
3.) Over regulation, cumbersome processes and too much reporting paperwork is busy suffocating the real service activities as people working in the industry are more focused on staying out of trouble than service quality.
4.) Many EB intermediaries lack sufficient knowledge, skill, staff and infrastructure to service their EB schemes appropriately.
5.) The majority of employers are unwilling to engage properly with his service providers and in far too many situations the calls of service providers to rectify any shortcomings simply fall on deaf ears.
6.) Last but not least, the nonchalant behavior of members/employees is at a disturbing high level.

By the time a complaint reaches the adjudicator, everyone has done what they could to cover their back sides, but the outcome did not live up to the individual's expectation.

Employers should appointed appropriately equipped benefit consultants, and benefit consultants need to play a much more active role as intermediary between Participating Employer and Administrator.
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