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Introduction

THIS MONTHS TOPICS

Another month! Another newsletter!!

We are conscious that long newsletters can be off putting and often do not get read as intended but we are finding so much that we feel you need to be aware of. The “unpublished” sections are often just as big as the published in an effort not to exceed the current 4/5 page format.

But are we delivering something useful for you? If not, please tell us. And tell us what we should focus on so we can ensure PS News is as focused and useful to you as we intend it to be.

Cheers for now •

FAIS News

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Education News

•

New Legislation

•

FSB News

•

New Tax Benefits

•

Ombud Cases

•

Broker Responsibility

•

Life Partners

•

Road Accident Fund Changes

•

Proudly Insurance

•

Disaster Recovery Plans

•

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THE PRETIUM TEAM

FAIS NEWS

•

VAT

•The FSB have started to publish, on their website, details of licenses that have been suspended. For underwriting managers, insurers and brokers with a sub broker network this is a vital tool to use to ensure your broker base remains within the law. For •

Road Accident Fund Changes

– you can establish the status of any broker by visiting the LOA website @ •

Legal Cases

•The FSB have moved to close up a loop hole in the need for all Representatives to have the same “Fit & Proper” requirements as those of the Key Individuals. The Act states that the standards of the Rep need to be “similar” to those of the KI, thus enabling an FSP to set their standards differently to that required of themselves. The FSB have now stated that this is not the case, although the statement was made in relation to another matter under discussion.

 The FSB have released the new fee schedule for the 2005/2006 levy year (October 06 of these with this Newsletter.

– September 07). We attach full details •We see there has been increasing levels of public discussion on SRI – that is

Social Responsibility Index

. It rates how well an investment vehicle is rated on its own social issues. It seems to have particular significance when it comes to retirement fund investments and places a lot of responsibility on Trustees to ensure that a portion of their investment monies (a 10% minimum has been touted) are placed with socially responsible investment vehicles. And the broker that advises funds and their trustees?

Another area that you need to be aware of when looking at the needs analysis. For more reading look at the recently released National Treasury paper dealing with the issue as well as the F&A news article of 13/5/05.

Education News:

•

INSETA

– a worthwhile site to add to your “favorite sites” or even subscribe to the Newsletter. With the pace of development in the educational sphere we all need to know what is happening. Go to www.inseta.org.za

to view the available information and to subscribe.

• From one of the most recent INSETA Newsletters we see that they have put together a draft of a new national short term insurance qualification and have invited comment. For those mariners and engineers here is your opportunity to get an optional segment included for your industry sector.

• One major aspect raised was the potential need for a second South African language for a full qualification for an NQF level 4 qualification.

The full qualification requirement is rumored (strongly) to be the next step in the FSB’s requirements post 2007. For most South Africans competency in a second language will not be a major hurdle to clear but for others from shores other than ours having to achieve this may be an issue. Whilst these proposals are still in the discussion stage it may be worth taking into account when planning not only what further training to do but by when think about – and now!

– if language is an issue then a speedy achievement of a higher level qualification may be something you need to • The

IISA

have also announced the development of a National Certificate in short term insurance, which will be an NQF4 qualification. As a full qualification at level 4 this should meet the likely higher credit requirements of the FSB •

IISA

– second language issues notwithstanding.

have released a useful document that provides details on their various examinations – both credits available and entry level requirements. They have also announced the plans for the formal handover of the Higher Certificate and Diploma in Insurance to

UNISA

centre for business management. Both these documents will be of use to any one utilizing the can supply copies of these via an e-mail if required – please let us know.

IISA

as their preferred method of study. We

What is the National Learners Records Database (NLRD)?

• This is the data base administered by the

South African Qualifications Authority (SAQA)

, ( www.saqa.co.za

) that contains, or will in time, all details relating to an individuals educational status. It requires each educational body, such as the

IISA ,

to download the results of its examinations into this date base. It allows access to the information by both individuals and employers. It will also provide details on accredited providers and registered assessors, although not all this information has yet been loaded onto the data base. For those of you responsible for the educational process within your own organization this will become a useful site to have access to. If you would like more information then please contact Faeeza at our offices and we will supply it to you.

As a reminder, as advised in our March Edition, the following dates apply for the next set of exams taking place:-

DAMELIN

Next available season FAIS I (June 05) FAIS II (Aug 05) Close off dates (May 05) (July 05)

IISA

Next available season - Sept 05 Close-off date - Mar 30 The time-table for 2006 from

IISA

has not been finalised, but as soon as we receive it, we will let you have it.

INTEC

Next exam November 2005 Close-off date - 31 May 2005 (this date is extendable, depending on the competency of your assignments) • The

IISA

have just announced that the exam portion of this exam will be extended to a 3 hour paper and not a 2 hour one as originally advised. The starting time originally advised remains the same.

• For those of you still looking at the best route for your further studies we suggest a look at I

NTEC

license categories available and have workshops to back up the studies College. They have the full range of – the one area we have found to be the most required feature in talking to clients. They will also assist in determining the current level of credits a person has, a useful service given the confusion over the same unit standards being in different exams/courses written. Get details at their website www.insurance.intec.edu.za

or contact 0860 1040 14.

•

IISA

have introduced a skills program aimed at intermediaries in the Long Term category A sector, new employees into the industry

New legislation

The Convergance Bill – this Bill is primarily aimed at combining the legislation that currently governs the broadcasting, telecommunications and internet industries. At first glance you might ask what this has to do with you! Well it seems this rules will stretch into the use of publishing news on websites, making software available for free download and sending messages by Instant Messenger. We are looking into this as a matter of interest only at this stage and will advise if we find anything of significance. In the meantime should you wish to know more please visit the Buys Inc website for more details.

PROCDATRA

came into effect on the 20th May. It has an effect on the FICA legislation, although it is more concerned with organizations that hold any property on behalf of others – more than likely the banking institutions. As it is so new we are looking at this one in more detail – we will provide specific detail to all clients who are Accountable Institutions in due course.

Retirement funding

– a discussion paper. Whilst not legislation at this stage the paper published late on 2004 will make interesting reading for all involved on the Retirement Fund industry. A useful summary was published in the EXTRA COVER publication of April/May by Advocate Leslie Primo

FSB news

– the FSB and SAIA have been working on joint initiatives aimed at consumer education. The reasons for this are many but one of the driving forces has been the need for signatories to the Financial Services Charter to commit 0,2% of after tax profits to consumer education. SAIA has been attempting

Feb 2005

Upwards of R4M will be spent in a series of related projects, aimed mainly at the LSM 1-5 sector in the “black” rural populations. If your target market is in this field expect an increased level of awareness from your clients during the course of the year. Full details of the plans can be found in the First Quarter 2005 edition of the FSB Bulletin website version can be accessed @ www.fsb.co.za.

SAIA Approved

are producing a monthly newsletter that you can subscribe to as well as visiting their web site. As we have pointed out in past understanding the SAIA Approved concept is vital for all brokers when insurers start making SAIA approved stipulations in their risk improvements and general security requirements. Visit the web site www.saia-approved.co.za

and/or e-mail michelle@saia approved.co.za

to subscribe to the newsletter.

We made mention of the

new tax benefits

in our April PS News but a good summary of the benefits that are directly applicable to small brokers is detailed in the April/May issue of EXTRA COVER by Christo Landman of Liberty Life – good news for many of us.

On the Life side – amongst the various cases reviewed over the last couple of months the one that caught our eye was the case of alleged fraudulent deductions from a complainant’s salary. Whilst “mistakes” do happen in this case the insurer involved took 3 years to sort out the problem, which has a quantum of only R510. The Ombud ordered the insurer to pay a penalty of R2, 000 in addition to the refund. Moral – manage your debit orders tightly – it may cost you more than you know.

And on the short term side – a couple for the motor underwriters. Is an unlicensed vehicle unroadworthy? Take a look at the details of such a case in the April edition of COVER, this was not seen as material to the loss and the claim was paid. In the May edition an attempt to repudiate a motor loss due to the driver traveling in excess of the speed limit is discussed. Once again the insurer could not walk away from this one – driving to fast, i.e. being negligent was not and cannot be taken as “failing to take reasonable precautions” .

Not an Ombud case, but sticking to the motor theme and with acknowledgements to a client of ours in Cape Town, what is the situation of an unlicensed third party when an accident occurs where the insured is at fault? The legal stance is apparently that the lack of a license by the third party does not allow the insured to walk away from their liability and the insured has no rights against the third party.

How far does the responsibility of the broker go?

Can a broker be held liable for a client’s loss if an In the April edition of PS News we talked about the then recent ruling on

“life partners

” and the effect this would have on the insurer successfully repudiates a claim? This matter is once again highlighted in an article by Professor needs analysis for couples in such a relationship. The Court of Appeal has overturned that decision, although not by unanimous Robert Vivian in the April COVER magazine. Whilst the issue debated was settled without the broker decision. The effects for you? Make sure that clients in such

Feb 2005

becoming involved the possibility seems to exist that a broker could be held liable, however stupid this may in place to provide the benefits desired for each other.

seem.

In the same edition Rob Otty of Deneys Reitz details a The debate on the proposed amendments to the

Accident Fund Road

continues; they have been approved by case of how a broker should ensure that a client knows and understands that any cover specifically requested has not been obtained. That Record of Advice issue – it is formality on what was discussed – develop it and use it.

Proudly Insurance

– we have made reference to this initiative before. They now have a web site ( www.proudlyinsurance.co.za

) provides more information that about governance, membership, events and recruitment. You need to know about this and similar initiatives – pay the site a visit, parliament for public hearings. If you are involved in Motor insurance you need to be totally up to speed on the developments – the results will have an impact on your business.

Disaster Recovery Plans

– as you all know we have been asking all clients to spend some time on such a plan for their business. As we have pointed out this goes way beyond the IT back up systems many people think it is. It should encompass the entire business operation, from staff, service providers, and premises and of course IT. The May edition of COVER contains an article by Ian Schwartz executive member of the Institute of Risk Management on this very subject. He talks of a possible countrywide standard becoming a reality in the near future as it is in the UK and given our tendency in SA to “follow the lead” probably correct. A related article by as we will, and keep yourself in touch.

Herman Schoeman of Guardrisk takes a logical step further, though the articles are not linked, by stating quite correctly that all companies should be focused making sure the entire organization does it right first time – or exercising EWRM, that’s Enterprise Wide Risk Management.

A new product on the market for the short term broker – the new “plain English”

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from Auto & General plus they have specific versions for specific SME industries. Whilst this is in answer to the Outsurance business product the plain English wording interests us, although no mention of a “gewone Afrikaans” version?

We have not yet had the opportunity to review it but it is certainly a step in a good direction and something all short term brokers will need to be aware of even if you do not use A&G as a market place.

Another aspect of the DRP and/or EWRM is the one of how often have you asked a commercial client if they have such a plan in place? Does it not make sense to include this in your needs analysis? Whilst on the subject, is your client subject to any specific legislation that requires of them a compliance function? Remember compliance is not only FAIS – FAIS simply uses compliance as a tool of enforcement. The advice you offer should be part of your client’s plans not be remote from it. If they do not have such a plan – help advise them to get one.

Derek Lydon writes an interesting article on the effects of

VAT

on premiums in the May edition of COVER. Its focus is on getting insurers to issue VAT exclusive policies and thus pass in a saving in this is okay from “double” tax to the client. If SARS’ perspective why is it even a debate?

E-Mail policy

– we have raised the need for each of you to have a formalized e-mail policy within your organizations. We have more often than not had a very limited response to this advice; however a recent CCMA ruling here in SA might make you pay a little more attention. A recent case had an employee dismissed for sending a sexy e-mail and the CCMA upheld the dismissal. Whilst the specifics of the case had a relevance to the decision it highlights that you need to set your standards – and stick by them. If you want to know more visit the Buys Inc Attorneys newsletter (Vol 2005 (8) April 2005) @ www.buys.co.za

. The same story also made the news in another electronic Newsletter for the financial industry www.finance24.com

.

Life Policy Quotation Standards

With effect from 1 February 2005 a new standard on the format and content of individual life policy quotations have been agreed by all LOA members.

Feb 2005

2005. See COVER February P64 for more detail.

Road Accident Fund changes

– if you are writing motor covers the article by Caroline da Silva in April’s COVER needs to be read.

Legal cases

 COVER March 2005 p20 – an interesting article by Prof Robert Vivian on the performance of motor policies when vehicles are subject to Forfeiture by the authorities. Those of you responsible for developing a motor product should pay particular attention to this one.

 Reinstatement conditions – another case that those of you responsible for developing property wordings should take note of. See COVER March 2005 p22 – article with acknowledgements to Deneys Reitz.

 Repudiation Rejected insurers, – COVER March 2005 p45 – Donald Dinnie Of Deneys Reitz. Interesting reading – especially for UMA’s and brokers with claims mandates. The use of the correct terminology is essential – make sure your staff know the differences and your documentation follows suit.

 Self inflicted injury – COVER March 2005 p48 – Donald Dinnie of Deneys Reitz will be of interest to life insurers and underwriters of specialist Personal Accident covers and it may be worthwhile just having a look at your wording (and punctuation) of exclusions relating to such injuries.

 Short term Ombud cases – COVER March 2005 p54 – Insurance claim meets divorce courts! An interesting case on not telling the truth on a claim form so the wife does find out where you were when your car was stolen – what do you think the decision was? Plus a case of a cell phone details not being updated and the new phone was stolen – the insurers paid and a risk address not being notified and the insurers did not pay.

 Life Ombud cases – COVER March 2005 p56 – one case deals with advertising and the need not to make statements that are in need of qualifying (in small print). The second a straightforward case of poor advice and how an insurer can be held accountable for incorrect advice as well.

 April’s COVER has the annual Life Ombud’s report – interesting stuff – what can you learn?

St George’s Park The Oval Corner Meadowbrook Lane & Sloane Street Bryanston East PO Box 9655 Devon Valley Johannesburg 1715 Directors C Ormrod, BD Thomas Tel: (011) 463 1573 Fax: (011) 463 1714 E-mail: [email protected]