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Policyholder Protection Rules

Policyholder Protection Rules. Agenda. Overview of PPR Impact of PPR Key areas of concern. Legal Context. Long Term Insurance Act (01/99) Section 62 - Policyholder Protection Rules Regulation = ease of change Bigger process - more regulation coming In particular:

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Policyholder Protection Rules

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  1. Policyholder Protection Rules

  2. Agenda • Overview of PPR • Impact of PPR • Key areas of concern

  3. Legal Context • Long Term Insurance Act (01/99) • Section 62 - Policyholder Protection Rules • Regulation = ease of change • Bigger process - more regulation coming • In particular: • Financial Advisory and Intermediary Services Bill

  4. Purpose of Rules • “To enable a policyholder to make informed decisions in regard to long-term insurance products and to ensure that intermediaries and insurers conduct business honestly and fairly, and with due care and diligence”

  5. Key Areas • Disclosure by the Intermediary • Disclosure by the Insurer • Accreditation Requirements • Mandate • Role of the Compliance Officer

  6. Important Definitions • Intermediary • Refers to any representative or independent intermediary • Policyholder • Any prospective policyholder and individual members of a retirement annuity fund and preservation fund

  7. Important Definitions • Replacement Policies • Policy entered into by a policyholder , wholly or partially in replacement of any other policy. • Effective Date • The date of entering into , variation or termination of any insurance transaction

  8. Informed Decision • In order to enable the policyholder to make an informed decision certain disclosures have to be made by : • The Intermediary at Contact Stage • The Insurer at Quote and Acceptance Stage

  9. Rules of Disclosure • Both the Intermediary and Insurer has the onusof proving disclosure • Disclosure must be in: • plain language • at the appropriate time • on any significant or material change

  10. Disclosure by Intermediary • Disclosure by intermediary: • At contact stage intermediary shall ensure at least the following disclosures are made in writing/confirmed in writing, telefax or electronic: • statutory notice • full names, title designation, addresses and contact details • legal status and confirmation of mandate • details of relevant experience • accreditation details • whether he holds indemnity insurance • any fee policyholder pays to intermediary

  11. Disclosure by Intermediary • The Statutory Notice and a Template with the intermediary disclosures will be available on Charter Life’s Intermediary Website

  12. Disclosure by Insurer • At Quote Stage the insurer has to make the following disclosures: • Statutory notice • Registered name, addresses and contact details • Name and contact detail of compliance officer or department and complaints procedure • Claims procedure

  13. Disclosure by Insurer • Name, class and type of policy • Benefit details- if investment, details on how value is determined • Premium detail and consequence of non-payment • Terms and conditions, guarantees, loadings, exclusions

  14. Disclosure by Insurer • Amount of escalation in premiums for first 5 years and then on five-year basis (max. 20 yrs) • Minimum guaranteed values, surrender value, illustrative values in monetary terms • All assumptions i.r.o amounts and costs • Commission, charges and fees • Replacement consequences and cooling off

  15. Disclosure by Insurer • Disclosure at Acceptance Stage : • Any of above disclosures, if not made at quote stage • Confirm any representations by/on behalf of policyholder which are material to risk assessment • Instances when benefits are to be provided and circumstances in which benefits are not provided

  16. Rules on Replacement • Insurer/Intermediary must disclose potential implications, cost and consequences of replacement • Intermediary must ensure that application is identified as application for replacement policy • New insurer must notify previous insurer of replacement -no later than date of submission of application

  17. Rules on Replacement • Person who believes policy is replacement and proper procedure not followed may lodge written complaint • New insurer must within 6 weeks, if satisfied that necessary, take disciplinary steps against intermediary, including • reclaiming commission/remuneration • terminating mandate • New insurer to offer client right of cancellation • Findings and actions to be reported to complainant and Registrar

  18. Rules on Cancellations and Cooling-Off • 30 day cooling-off period from receipt of summary : • Where no benefit paid or claimed or insured event occurred • Cancellation notice must be in writing • Premium refunded after deduction of cost for risk cover and market related investment losses • Insurer must comply with request not later than 60 days after effective date

  19. Cancellation and Cooling-Off • Where policy can in law not be cancelled or by virtue of terms and nature not capable of being cancelled - fact to be disclosed to policyholder by intermediary/insurer BEFORE entering into insurance transaction in respect of the policy

  20. Group Schemes and Fund Policies Additional disclosures: • Group Scheme • policy summary to all participating members of voluntary scheme • membership certificate issued to all members • Fund Policy • fund policy delivered to principal officer, trustees within six months after effective date/commencement date • policy to include conditions relating to discontinuance

  21. General Rules • Duties of Registrar • May take any steps deemed necessary to inform policyholders/public of existence, ambit and meaning of these Rules • Copy of Rules to be readily available • Issue non-binding guidelines and best conduct directives • Compile annual compliance review and submit to Advisory Committee

  22. General Rules • Non-compliance: • Written complaint to be lodged to party involved and if not resolved, to Registrar • Insurer/Intermediary to fully reply to complaint to Registrar if required • Registrar may require corrective steps

  23. General Rules • Waiver of Rights • NO WAIVER BY ANY POLICYHOLDER OF ANY RIGHT OR BENEFIT GRANTED BY THESE RULES WILL BE VALID

  24. Additional Rulesof Insurers and Intermediaries • Insurer must furnish intermediary with written mandate • Both insurer and intermediary must keep records of all disclosures made by them - must be kept for three years after maturity or termination of the policy • Copies of such disclosures to be provided to policyholder on request

  25. Additional Rulesof Insurers and Intermediaries • Insurer must insure that summary of policy reduced to written or printed form and issued to policyholder within 60 days • Claim: decision with regard to repudiation or quantum - claimant to be informed in writing of reasons • Representations to be made within 90 days

  26. Additional Rules • Within six months after coming into operation of Rules: • Insurers must accredit intermediaries on the products they may sell or service, based on “appropriate information and training”

  27. Additional Rules • Insurers must submit written report after end of every financial year on: • steps taken to ensure compliance • problems experienced with interpretation and implementation of Rules • summary of number and types of complaints

  28. Additional Rules • The practice of signing blank or uncompleted forms by a policyholder, whereby someone else fills in details at later stage, shall be an offence by the insurance parties in terms of these Rules

  29. Direct marketing • Telesales personnel must disclose that they earn commission and amount thereof • As long as all disclosures are made, need not follow exact sequence of Rules. • Call must be voice-logged (and must be able to provide copy of voice-logging) • Full disclosure must be made in writing/electronic/telefax after telesale

  30. Policy Loans • Insurer must disclose • interest at time of entering into loan • if interest will fluctuate • repayment arrangements • Annually:amount of loan in relation to value of policy and interest rate and changes • When loan is about to equal value of policy • When benefits cease as result of loan = value of policy

  31. Cession • Insurer must disclose on receipt of notification: • that cession is recorded • nature of cession: outright/security • name of cessionary

  32. Status • The Rules were Gazetted on 23 February 2001: • Implementation - 1 July 2001 • Accreditation - 1 January 2002

  33. What has Charter Life done? • Awareness campaigns • Intermediary Website • Training and Development • Accreditation

  34. Accreditation • The aim of Accreditation is to : • Develop and monitor (database) intermediaries knowledge in our products and systems • Assist intermediaries with their business decisions

  35. Why is Accreditation necessary? • Legislation • Increased Consumerism • Press coverage of the industry • Intermediary associations • Professionalism

  36. Accreditation Process • Professionally Accredited: • Charter Specific Accreditation Exams • Mandate

  37. Policyholder Protection Rules

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