COFI Bill… disappointed, irritated and concerned

03 April 2019 Myra Knoesen

There is a lot of talk and criticism about regulatory reforms, specifically the development of the Conduct of Financial Institutions Bill (COFI).

FAnews received a press release from the Council for Medical Schemes (CMS) about their concerns regarding the COFI Bill, which we thought would be interesting to share with our readers. 

Please note these are the views of the CMS and not the views of FAnews. 

The issue at hand

The CMS has rejected the Bill aimed at regulating how the financial services industry treats its customers, saying it would be unworkable to lump the health and finance sector in the same basket. 

The CMS said on Tuesday that the COFI Bill would disempower and leave it as a lame duck, by consolidating the financial sector laws into one comprehensive market conduct law. 

The regulator said it is disappointed, irritated and concerned the COFI Bill, which was published by the Minister of Finance last December for public comments until Monday April 1, would erode its mandate. 

Eroding the mandate

“If passed as it is, the Bill will erode the CMS’s mandate.  Amongst others, the mandate of the CMS is to protect the interests of members at all times; control and co-ordinate the functioning of schemes in a manner that is complementary with national policy, investigate complaints, rules registration and settle disputes in relation to the affairs of schemes as provided for in the Medical Schemes Act (MSA) and advise the minister on any matter concerning the medical schemes,” said Dr Sipho Kabane, CMS Chief Executive and Registrar. 

“It is therefore our considered view that removing these core regulatory functions from the CMS and placing them with the Financial Services Conduct Authority (FSCA), is tantamount to legislating the CMS out of existence as an independent regulator,” continued Dr Kabane. 

Further problems on the horizon

The FSCA, or Twin Peaks was first adopted in Australia two decades ago to create and enforce prudential regulations and to deter misconduct and protect consumers of financial products and services. 

“The publication of the COFI Bill is appreciated and the opportunity to make meaningful inputs is applauded. However, the medical schemes industry is very technical and clinical in nature. For that reason, specialised business units investigate and resolve complaints.  If additional statutory or even voluntary dispute resolution mechanisms are created, it will create further problems for members of medical schemes who are already overwhelmed by the complexities and asymmetry of information in the health insurance sector. We are particularly opposed to the sections of this Bill that refer to the medical schemes industry. We believe that these sections need to be reworked in consultation with the National Department of Health and the CMS,” emphasised Dr Kabane. 

Medical Schemes do not operate in the same way as insurance products and therefore, do not have to be subjected to similar conduct requirements. The specific regulatory functions that include product design, disclosures, and claims management in medical schemes should fully reside under the CMS in line with the powers accorded to it by the MSA, 1998. 

It needs to be stated that currently the CMS is the sole mandated regulator of medical schemes, medical scheme administrators and managed care organisations.  There is currently no discussions in relation to, or existence of, concurrent regulatory arrangements in place to regulate medical schemes and related entities between the CMS and any regulatory entity including the FSCA, barring collaboration and co-operation on specific regulatory interventions. 

CMS demands proper consultation

The failure to appropriately and officially communicate the imminent demise of the CMS, or its absorption by the FSCA to all key stakeholders, will create a lot of anxiety and instability in the medical scheme industry as currently regulated by the CMS. 

“Regulatory failure is almost a certain consequent of this poor communication and stakeholder management, as schemes will simply be confused with respect to who their regulator is between the CMS and FSCA. Unscrupulous schemes will take advantage of that situation and member interests will be placed at great risk,” said Dr Kabane. 

The CMS said the COFI Bill would undermine its work in the National Health Insurance (NHI) and the Health Market Inquiry recommendations regarding CMS regulatory role. 

“There is no mention of how the FSCA will be able to facilitate this national policy support function after the transfer. The CMS is currently engaged in several strategic projects aimed at coordinating the industry towards the implementation of the NHI. Apart from the NHI, the CMS is supporting the national Health Ministry with a number of policy interventions which will also be placed at risk with the transfer of regulatory powers from the CMS to the FSCA,” added Dr Kabane. 

“The CMS demands that National Treasury, and FSCA properly consult with the CMS before the final version of the COFI Bill is sent to Parliament for promulgation,” concluded Dr Kabane. 

Editor’s Thoughts:
An important part of the FSCA’s mandate is to protect and maintain the sustainability of the financial sector, but is lumping the health and finance sector in the same basket is a viable option? As mentioned above, the medical schemes industry is very technical and clinical in nature as it does not operate in the same way as insurance products. Do you believe the COFI Bill will erode the CMS’s mandate? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts



Added by Adam Samie, 03 Apr 2019
The Medical Schemes as currently defined are really insurance products by another name. There is no reason why it should be subjected to the Twin Peaks regulation. This move in itself may reduce the mystery around many medical aid scheme products leading to more focussed competition and ultimate cost reductions
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Added by Humphrey, 03 Apr 2019
"Medical Schemes do not operate in the same way as insurance products" - exactly and that is why we should never have even gone down the road of the demarcation issue - the short-term insurance industry should have been permitted to continue with their products as they were as they are not medical schemes and do not operate like medical schemes.
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Added by Peter, 03 Apr 2019
It seems that in the rush to get control/lay their hands on the resources in the Financial Industry the Regulators COMPLETELY forgot that between two peaks is a deep valley...Each regulator (or at least one of the two) will have to descend and accent to talk to the other - with all the politics and egos around us I do not see any regulator breaking a sweat to descend from his/her Peak...Prepare for much more chaos and financial misconduct!
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Added by Paul, 03 Apr 2019
I agree with Dr Kabane.
CMS should be left as is and continuously improved and fine tuned.
I do not agree with twin peaks and its massively over complicated structure and specifically the clear channel it has for political interference and meddling.

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