Transcript Document

April 2005
Introduction
Another month has gone
by and compliance is
starting to imbed itself in
most companies standard
business practice.
This month we have a lot
of general information and
some useful specifics.
THE PRETIUM TEAM
THIS MONTHS TOPICS
•Application for new licenses
•IT legislation
•New business opportunities
•Underwriting managers and brokers ….
•VAT
•Financial Sector Charter
•Vehicle security
•National Credit Bill
•Extra Cover
•The Financial Services Ombud ……
•The changing face of a broker’s …….
•Earthquake and other exclusions
•Geysers
•Gateway
•Alarm Installations
•Education news
Application for new licenses
We have had a number of existing and new clients in recent weeks that required a
new license. What has become very clear is that the “fast track” system which
promises an application will not get caught up in the main backlogs still requires a
processing period of between 2 and 3 months and this is on the understanding all
aspects are in order when the application is submitted. Please take this into
account in any planning you are doing that may require a new license as no license
= no trading!
IT legislation – a useful tool you can use
We have been subscribing to a very interesting newsletter from our country’s
leading legal consultants in the IT field – Buys Incorporated. They have just
updated their format making It much more accessible. It has various useful articles
on IT matters, such as IT Law, information on the latest hacking cases, domain
names that have been suspended and details of various IT related events.
Of particular importance to you from a general compliance perspective is the ICT
(Information Communications Technology Act) risk checklist. You will recall in the
original analysis we highlighted the need for compliance with this piece of
legislation. Generally we found a high level of ignorance with the Act and it’s
implications on a company. This checklist will go along way to highlighting your
own exposures. The checklist can be downloaded from the web site – but be
warned it is no quick fix – it is a detailed analysis and will take some time and effort.
If you feel you would like our assistance in completion please talk to us.
You can subscribe by contacting them at [email protected] or by phone on
(011) 215 2270 or (021) 461 7387.
New business
opportunities
Underwriting managers and brokers
with administration agreements
Want to know what and
where
to
sell
new
business? Have a look at
the summarised report
from FinMark Trust in the
January issue of COVER
(p20) on the percentage
of people who do/do not
have certain types of
insurance products –
interesting!
We have issued a separate PS News to all our
UMA clients and brokers with administration
agreements on developments relating to the
licensing and disclosure issues relevant to them.
If you would like a copy for information purposes
please drop us an e-mail to organise a copy. If
you are a broker with such an agreement and
you did not get a copy phone Bryan or Craig to
make sure you have no added responsibilities
we have not already told you about. April’s
COVER has an article by Patrick Bracher on the
legal standing of a UMA – do you qualify to be
called a UMA?
VAT – The recent changes to the VAT rules require vendors to have their clients
VAT number on the tax invoices issued. This caused us to take a closer look at
the policy schedules issued by those of our clients that issue policy
documentation; Insurers, UMA’s and brokers.
We found a number of issues that need attention: In fact other than the inclusion
of the client’s VAT number for invoices over R3,000, the errors encountered are
long standing ones and the requirements should have been in place already.
Let us look at a typical transaction for a UMA when issuing a policy:
Insurer premium – this will require the insurers VAT number to be shown AND a
note to the effect that it applies to the risk premium only.
(b) UMA admin fee (not the insurers) – this will require the UMA’s VAT number to
be shown AND a note to the effect that it applies to the fees only.
If a broker fee is being collected by the UMA the UMA, in their capacity as agent
for the broker, can debit and collect the fees on behalf of the broker. The broker’s
VAT number needs not be shown. However, the UMA (or insurer) needs to
provide the broker with full details of those tax invoices issued on its behalf for
each accounting month. We see the commission statement as the ideal tool for
this – updated with a suitable narrative to this effect.
In short one invoice can contain multiple vendor charges, provided that each
vendor’s VAT number is included and subject to the required narrative of which
number belongs to which charge.
One other practice we found that is incorrect is the issuing of “tax invoices” by
brokers for insurer premiums. The purpose of raising such entries is to create an
accounting entry to enable the broker to track payment by the client and as such
should be done by way of a debit note and not a Tax Invoice – the policy schedule
will become the required tax invoice once the premium has been paid.
We would like to acknowledge the valuable input of KPMG and Hollard in clearing
the mists of confusion on these issues.
If you want or need to have more information on VAT in insurance the recently
issued KPMG guide entitled “Short-Term Insurance and VAT” can be obtained
from Candice Carrihill at KPMG on (011) 647 7111.
–
two articles that deal with this
matter in COVER – p28 deals
with a status report and p62 with
how Charter will affect matters
such
as
use
of
BEE
organizations on the claims
arena. If you thought you were
too small to have to consider the
Charter – think again – you and
your clients will be involved in
the process.
Financial Sector Charter
National Credit Bill –
any
one involved in the use of credit
sales and insurance linked to
them – will likely feel the impact
of this new Act. The motor dealer
segment will need to pay
particular attention to this. See
p20 of COVER March 2005
where Caroline da Silva outlines
the objectives of the Act. We are
busy reviewing this Act in more
detail and will chat to you if we
feel you are affected, once we
have completed this.
Extra COVER
The February / March issue of
Extra Cover has a number of
articles of interest to our
life/investment clients, not least
of which is the lead article on life
product
costings
and
commission structures. From a
FAIS point of view the author,
Chris Busschau – the SAFSIA
Vice Chairman, says that
brokers need to spend more time
analyzing quotes – quoting the
projected maturity values will no
longer suffice.
– the need to
understand the products and the policy
wordings
Vehicle security
There was a very interesting article in the
March 22nd edition of F&A News on this
subject. Whilst the article is far too long to
repeat (we can send you a copy if
required – just let us know) we can
highlight the key aspects for you.
The crux of the article is that a broker
needs to understand the various vehicle
security levels. This includes whether a
system is with or without an alarm system.
They should ensure that the policy
wording used is fully understood by the
client should the wrong level be installed
in a vehicle, the effects of a system failure
or should a system be changed.
There are many wording differences –
make sure your advice incorporates the
effects of non-compliance. You will recall
that one of the examples used by us to
illustrate the practical effects of FAIS is
the need to be more specific in the area of
security – vehicle or property. “Vehicle
security warranty” will not cut it any longer.
Access to and understanding of the SAIA
VSS system is essential. You can get
details
from
the
SAIA
website
(www.sainsurance.co.za).
In short – get this level of information in
your needs analysis and detail it fully in
your advice.
The Financial Services Ombud
Schemes Act will affect how complaints
and disputes are handled within the
Ombud schemes currently in place.
Johann Davey of Old Mutual gives some
insight into the implications of this Act on
p51 of COVER March 2005. In short
expect the focus on settling a client
dispute to become more focused.
The changing face of a
broker’s responsibility
Earthquake and other
exclusions
April’s COVER has an article by
Robert Vivian – interesting as
always but the potential for a
brokers exposure when claims get
repudiated is scarry stuff, and
brokers tell us a formal needs
analysis is not needed!! The article
on the following page (30/31) by
Rob Otty of Deneys Reitz, goes
some way to making it clear what
the duties of a broker are – but
once again highlights the need for
high levels of formality in
presenting terms to a client.
How well do you know the “fine print”
of the policies you sell? Have a read of
the article by Anton Ossip of
Alexander Forbes in April’s COVER on
the recent earthquake
and the
Feb 2005
application of policy cover to the event
– he states “you get what you pay for”
– but you need to know that first!
We have been having a look at
GATEWAY – a free website offered
by Stocker Risk – some very useful
information for those of you dealing in
the
short
term
industry.
www.insurancegateway.co.za
Geysers
The next area that SAIA is hoping
to enforce some kind of standards
is in the area of plumbing
installations
and
specifically
geysers in an attempt to improve
the standards of installation in post
loss replacements and thus reduce
or eliminate future losses that
result from poor quality products
and workmanship. They report that
one insurer (we do not know who)
pays over 500 geyser related
claims a month at a cost of R7, 8
million!!
Road
Accident
Fund
changes – if you are writing motor
covers the article by Caroline da
Silva in April’s COVER needs to be
read.
Alarm installations
Are you aware that insurers are meant
to be insisting on SAIA/SAIDSA
approved alarms, which require a
specific certificate to be issued? From
the audits we have done this year
alone we have yet to see such a
specific request from an insurer/UMA
nor have we seen brokers asking for or
receiving such installation certificates.
We would suggest that you discuss
this issue with insurers/UMA’s and get
clarity on what is required – especially
for new installations – so that the
advice you give is correct.
There are already standards for gates
and SAIA will be adding standards for
swing gates and burglar bars shortly.
For those of you involved on funeral business we see there is a specific section
on the FSB web site that deals with “What you need to know and your rights when
taking a funeral cover” – worth a visit to see how your processes and
documentation stand up to the FSB’s advice. Go to www.fsb.co.za - “consumer
education” “Financial Services Board funeral brochure”
Education news
LUASA have just announced a range of professional qualifications for their
members. These have the required SAQA accreditation and range from the
highest level “Professional Financial Planner” – a NQF 7 qualification down to a
“Certified Financial Advisor” which is a NQF 4 (140 CREDITS) qualification and
has a short term option as well.
Feb 2005
An interesting feature of maintaining LUASA qualifications is the need for
continuing education. Holders of the various titles will need to obtain “credits”
each year to show ongoing education. This has been tried by the CII in the UK
and we believe (educated guess only at this stage) that this will be the ultimate
requirement of the authorities once the final competency levels have been set
and attained. For more information contact [email protected]
Many insurers are running their own INSETA approved courses with credits
that you can use in attaining your 2/3 year requirement. However we have seen
a couple of problems:
•The credits often overlap with credits obtained elsewhere. For example the
Santam MMII course offers 31 credits at NQF level 4 however if you have done
the RPL one off assessment or CoP then you will only get 22 credits, leaving
you short of your 60 credit requirement.
•We have seen certificates issued that “mix” up level 4 and 5 credits – at first
glance you have 31 credits – but on closer scrutiny this is made up of 19 credits
at level 4 and 22 credits at level 5 – you cannot add credits across NQF levels.
We have also had experience of “management diplomas” not being accredited
by INSETA. No credits would accrue from attending some courses. These are
credible institutions offering these courses - one we came across was by UCT
– who told us they did not feel it necessary to get it accredited!
The moral of the story – always ensure that any educational process you go
through gives you useable credits at the correct level. Only consider non
accredited courses if you either do not need the credits or the course material
will add some value to your staff’s knowledge notwithstanding the need to
attain FAIS credits.
The IISA has details of its new NQF 2 and 3 programs in April’s COVER p69.
This may be of use to those of you involved in Life Category A products. The
development of the CoP and ICiBS courses into what will be known as the
National Certificate in Short Term Insurance is also detailed.
Tel: (011) 463 1573
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