An update on the regulatory front

Danny Joffe

With evolving regulatory landscape, Danny Joffe, Head of Legal at Hollard Insure, provided thought leadership on some of the trends in the regulatory environment, with an update on the Protection of Personal Information (POPI) Act, the Policyholder Protection Rules (PPRs) and the Conduct of Financial Institutions Bill (COFI).

POPIA, PPRs and COFI 

The year 2021 is going to be another business year for Financial Service Providers (FSPs) with new legislation, which significantly governs operational requirements, becoming law. The main requirements of POPIA will become law on 1 July this year, and will fundamentally regulate all processors of personal data, both to insure they have the data subject’s consent and that they have adequate security to guard the data sufficiently. The Information Regulator will be keen to establish her authority early on, and so financial service provides who have significant personal client data will need to make sure they comply with the various regulations,” said Joffe.

“In the age of considerable cyber attacks on information technology systems, and with many employees still working from home, caution will have to be exercised to make sure compliance is in order,” added Joffe.

“The second major piece of legislation, which is likely to strongly impact FSPs, is the COFI Bill which is expected to be submitted to parliament during the course of this year. However, time is running short, given the number of comments submitted for the last draft. This legislation will allow the Financial Sector Conduct Authority (FSCA) to govern financial conduct in South Africa and will entail all financial service providers to re-license, much like insurers were required to do so, in terms of the Insurance Act. It will provide one overarching legislation to conduct related issues, as opposed to relying on the old Act and subordinate legislation,” continued Joffe.

“There is also strong emphasis on implementing TCG, legislatively in the non PPR domain, as well as entrenching governance of conflict of interest and transformation plans for the industry. It will also create certainly, with respect to activity segmentation and Financial Advisory and Intermediary Services (FAIS) related issues. As stated above, it is not certain it will be finalised this year, and further clarity will be received shortly in this regard,” added Joffe.

Some of the trends 

“The regulatory environment is looking to further principals, with respect to proper customer protection, as well as financial soundness for all insurers and reinsurers in the value chain. Furthermore, transformation will also be a priority, as well as assisting the industry to increase digital solutions in the insurance industry, by allowing customers easier way to transact digitally, while still providing conduct protection,” said Joffe.

“This is an exciting space, and new innovative products and companies are now coming into the market producing a compelling value proposition,” added Joffe.

“Conflict of interest and prudential soundness will also form the backbone of cell captive legislation, which still needs to be finalised, and dealt with. Finally, the work done by Deloittes in providing a risk assessment for the Financial Intelligence Centre will hopefully provide clarity as to whether non-life insurers and brokers will need to be included in the accountable institution definitions, which would increase their administrative obligations significantly,” emphasised Joffe.

Where should the immediate focus be? 

“COVID-19 raised some critical issues during 2020/2021 (we still do not have an understanding as to when the COVID era will end), and the regulator will want to provide regulatory guidance to learn from the experiences of the last 15 months,” said Joffe.

“Many more financial service provider employees are, and still will be working off site, going forward, and assurance needs to be provided that this will not prejudice customers and the prudential health of the industry. Issues like data protection and integrity, because of this, will need to be looked at. The Business Interruption claims, and court actions, also showed that policy clauses have not all been tested, and when untested, situations play out with clauses rarely claimed on before. There needs to be a process that enjoys the confidence of both insurers and policyholders, to bring quick certainty,” added Joffe.

“Furthermore, insurers showed a real willingness to assist clients with premium discounts and refunds, as well as brokers with fees and commissions, but these processes were not legislated for, and all required an element of uncertainty and consultation with regulators. These are all issues that will need to be looked at by the regulator,” emphasised Joffe.

“The next year or two will continue to be a turbulent one with regards to regulatory change, specifically with POPIA, COFI and potentially FICA changes. It is important that brokers stay well informed of the effects of these changes. Brokers and insurers must work together, to ensure an innovative and attractive proposition for clients to understand the value of a broker and the important products on offer in the insurance market. The economy will improve strongly, once the COVID era passes, and participants need to be equipped and ready to take advantage,” concluded Joffe.

Writer’s thoughts:
The industry is bracing itself to deal with the regulatory changes, and brokers and insurers need to stay well informed of the effects of these changes. Many, however, believe that what we need is less regulation not more. Do you believe the industry has overwhelmed itself with its own excessive regulation? Please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za.