The FSBs engaging approach to regulation

If there has been one constant source of concern for intermediaries in the industry, it has been regulation. Intermediaries often have to guess what the regulator is doing and when they will implement the pieces of legislation that they consistently talk about.

This is all set to change. The Twin Peaks Bill is making its way through parliament and should be ratified by the end of the year. Also, the Financial Services Board (FSB) are actually giving firm deadlines for key issues such as the Retail Distribution Review (RDR) and Treating Customers Fairly (TCF).

The winds of change are here

Timeline inconsistencies have been a perpetual bugbear and have been something that the FSB has not addressed in the best possible way in the past.

Timelines were promised and were waved away as the dates rolled by. Speaking at the recently held South African Underwriting Managers Association (SAUMA) Conference, Farzana Badat – Head of Department: Insurance Compliance (Conduct of Business Supervision) at the FSB – said that there is a specific reason this happened.

“The FSB has changed its view to engage with insurers and brokers as opposed to regulating with a big stick. This means that there has been a lot of engagement with industry role players. The delays have been because we want to change the regulation so that it benefits the biggest possible group,” said Badat.

To add gravity to this statement, Badat added that every person and company plays a critical role within the industry. Therefore, there cannot be a silo approach to regulation. It has to benefit the industry as a whole and there needs to be an alignment of interests across the board.

Critical point

So it seems that the FSB is listening to the industry, even if it may not seem that way for some insurers or intermediaries.

This is also a reason for the delays, Badat said that the regulator received a plethora of comments and has had to take a considerable amount of time to sit, analyse and dissect the comment.

The next step in the process is to align objectives. After this, Badat said, nobody can say that they cannot achieve fair outcomes when it comes to clients.

Binder wars

At the beginning of 2016, the FSB announced that they would be taking a hard stance on binders saying that if they don’t add value to an insurer and was not absolutely needed, they would be done away with.

This was refined even further when the FSB said that it was unacceptable for intermediaries to get paid for bringing clients to an insurer and for underwriting a certain part of their business. This double payment was the FSB’s bugbear.

The time that has passed since this announcement has been an anxious wait for insurers and intermediaries for the FSB to show their hand when it comes to this. A particular area of concern has been binder caps.

“The FSB has proposed certain caps, and there has been engagement with the industry regarding specific caps. Yes, it has been that intermediaries have had to motivate to us why they charge a specific fee, but it has opened our eyes to different ways of thinking,” said Badat.

Commercial binders

In their defence, the FSB have not approached this in an unreasonable way and they do acknowledge that commercial binders to add specific value to the industry.

“We see the value that commercial binders provide to the industry. However, insurers and intermediaries need to show us why these binders exist. We have not made a final decision on capping commercial binders, but we can say that they have not been completely taken off the table,” said Badat.

We know that one of the reasons why these binders exist is because skills is a problem within insurers and it becomes costly to import skills or to upskill staff who will end up doing more than one job. However, if we read between the lines with what the FSB is saying about its issues with binders, cost saving alone may not be the best reason for retaining a binder.

Editor’s Thoughts:
This will get resolved in due course. Whether the industry will be happy with it will be another issue altogether. All we can hope is that the FSB does what is best for the industry. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comment on this Post

Name*

Email Address*

Comment*

 

Submit Comment