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The Financial Sector Conduct Authority
("FSCA") has announced certain proposed
amendments to the Policyholder Protection Rules
("PPRs") for both life and non-life
The main objective of the draft proposed amendments is to give
effect to enhancements that were made to the PPRs during
2017. The proposed changes are aimed at further protecting
financial customers. We set out below a summary of the
proposed amendments applicable to the PPRs. The amendments are
still in draft form and so will not be effective at this
A summary of the proposed
Rule 1: Requirements for the fair
treatment of policyholders
- The effect of this amendment is that insurers are required to
ensure that their policies, procedures and systems ensure
the fair treatment of policyholders.
- The addition of "system" is due to the increased
reliance by insurers on technology in their operations. These
systems play an integral part in all stages of the policy
|Rule 2: Product design
- The principles relating to product design will be extended to
consider the longer-term objectives and potential outcomes for
policyholders at the product design stage.
- The rule makes it clear that the board of directors of an
insurer is ultimately responsible for the appropriateness of all
products that are introduced in the market.
- Further, the proposed changes require insurers to establish and
maintain a board-approved product design
Rule 2A: Microinsurance standards (in the
non-life insurance PPRs) and funeral product standards (in the life
- The proposed amendment proposes a deletion of the 12 month
contractual term limitation applicable to microinsurance
- The reason for the proposed amendment is to ensure an
equilibrium between traditional insurers that offer funeral type
products and microinsurers. As a result of the proposed
amendment, traditional insurers and microinsurers are subject
to the same requirements in regard to limitations on imposing
|Rule 6: Determining premiums (and excesses
– non-life insurance PPRs)
- This rule is amended to clarify that administration fees are
not allowed before or after the inception of the policy.
|Rule 10: Marketing
- This rule is amended slightly to expand on advertisements that
refer to a loyalty benefits, no-claim bonuses, or rebates in
- The amendment ensures balanced advertising in relation to the
primary benefits of the policy being advertised, prohibits the use
of the advertisement as an inducement and requires clear
communication on suitability.
|Rule 11: Disclosures
- Insofar as "bundled products" are concerned, the
amendment imposes an obligation on insurers to provide the
policyholder with additional information where a policy is entered
into in connection with other goods or services.
|Rule 12: Intermediation and
- The addition of Rule 12.1A requires insurers to ensure that
they have "dynamic and responsive processes and controls over
[their] chosen distribution channel".
|Rule 14: Monitoring and review of product
- The amendments propose that insurers regularly review product
performance to ensure that products are distributed and remain
suitable to the target market.
Rule 17: Claims management
- The proposed amendment requires an expansion of the rule so as
to allow reasonable processes and time periods within which a
policyholder can lodge a claim.
- This is in response to the outcome of FSCA's investigations
revealing that policyholders were given unreasonably short time
periods within which to lodge a claim. The FSCA found that
this has often been used as a ground to repudiate the policy where
a claim is not lodged within the required time period.
|Rule 18: Complaints
- The proposal is to remove the distinction between a
"reportable complaint" and a "non-reportable
complaint". This means that this rule no longer limits
complaints to only those which are
Rule 19 (ST) / Rule 20 (LT): Termination of
- The amendment proposes the insertion of a provision insofar as
policies including loyalty benefits are concerned. The
proposed provision records that in the event that this type of
policy is terminated due to the death of a policyholder, the
accumulated value as per the agreed contractual date must be paid
to the estate of the policyholder or nominated
This bulletin was prepared by partner Deanne Wood, associate
Emma Alimohammadi and candidate attorney Alice Letsoalo.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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