The South African financial services industry is going through a
prolonged period of uncertainty while the Financial Services Board (FSB)
is in the process of implementing legislation which it feels will
improve the face of the industry and the way in which it operates. But
while it is doing this, and the industry is sailing into unchartered
waters, there is the temptation for unscrupulous companies to take
advantage of the situation
presented by the industry’s current state of play.
The industry has come a long way in moving away from the perception that it is being run by a bunch of sharks which are only interested in receiving maximum premiums while providing minimum value for these premiums.
However, there are cases where this occurs. And when this does occur, whose responsibility it is to step in and implement mitigation measures?
Skulduggery reportedly rampant in the industry
While there are very few reports about this in the industry, we would be foolish to turn a blind eye towards it and think that it does not occur. Recent reports from a Durban based consumer journalist profiled the case of a Pinetown insurance company who was happy to take premiums from its customers pretending to be a reputable company while harbouring no intentions of paying out claims.
Reports show that Model Insurance has been operating since 2011 and prides itself on the fact that it offers low premiums and incentivises existing clients to refer new clients to them.
According to at least six clients, the company gave the go-ahead for repairs to accident damaged vehicles; but failed to follow through on payments to panelbeaters and towing companies once the repairs had been completed. Media reports point out that at least two consumers are still waiting for payments on claims submitted and authorised in February and May 2012 respectively.
The Financial Intermediaries Association of South Africa (FIA) adds that this means that as many as 884 clients countrywide have been paying insurance premiums to Model Insurance totalling around R250 000 per month arguably without cover. It has since emerged that Model Insurance, owned by Pieter de Wet, was trading without the required license from the Financial Services Board (FSB). De Wet, meanwhile, alleges that the company is just five months from receiving it licence.
Knocking on the door of the FSB
At its recent Gauteng Regional Conference, the FIA reports that this needs to fall at the door step of the FSB and that the regulator needs to get involved at the early stages of some cases in order to prevent aberrant industry practices.
“The experiences that clients have allegedly suffered at the hands of Model Insurance are wholly unacceptable,” says Barry Taylor, FIA Chair of the Short-Term Insurance Executive Committee. But he warns that such incidents are on the rise in a market where consumers increasingly transact for low cost motor vehicle insurance products without the benefit of financial advice.
“While we applaud attempts by both insurer and insured to reduce the cost of their motor insurance premiums we would urge both parties to make sure they understand the terms and conditions – including exclusions – in their policy wordings,” he says.
“The first line of defence for a consumer transacting for short-term insurance is to transact with an FSB licensed insurer, preferably a member of the South African Insurance Association (SAIA). From an FIA perspective we would urge consumers to transact with the assistance of an FIA broker.”
How was Model Insurance allowed to operate in the first place? Surely there are controls and measures in place to ensure that all companies operating within the industry are doing so legally? As the industry regulator, the FSB has a duty to monitor and put a stop to these practices before they affect the public, no matter how big the industry is.
This is also a clear indication that there is very little awareness as to what the public needs to look out for when it comes to potential red flag situations. And when this is the case, scammers have a platform to take advantage of the public.
Editor’s Thoughts:
The FIA asks if the entire debacle could have been avoided with tighter enforcement measures? In a previous newsletter published by the FAnews, the FIA pleaded with the FSB to consider how regulation, shifting compliance deadlines, rising compliance costs and a pending remuneration review would impact the country’s risk and financial advisors. It goes beyond that. The FSB needs to implement measures and controls which avoids this situation, but it also needs to intensify its focus on consumer education which would bring these red flag situations to the public eye. This would completely avoid these situations. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughtsjonathan@fanews.co.za.
presented by the industry’s current state of play.
The industry has come a long way in moving away from the perception that it is being run by a bunch of sharks which are only interested in receiving maximum premiums while providing minimum value for these premiums.
However, there are cases where this occurs. And when this does occur, whose responsibility it is to step in and implement mitigation measures?
Skulduggery reportedly rampant in the industry
While there are very few reports about this in the industry, we would be foolish to turn a blind eye towards it and think that it does not occur. Recent reports from a Durban based consumer journalist profiled the case of a Pinetown insurance company who was happy to take premiums from its customers pretending to be a reputable company while harbouring no intentions of paying out claims.
Reports show that Model Insurance has been operating since 2011 and prides itself on the fact that it offers low premiums and incentivises existing clients to refer new clients to them.
According to at least six clients, the company gave the go-ahead for repairs to accident damaged vehicles; but failed to follow through on payments to panelbeaters and towing companies once the repairs had been completed. Media reports point out that at least two consumers are still waiting for payments on claims submitted and authorised in February and May 2012 respectively.
The Financial Intermediaries Association of South Africa (FIA) adds that this means that as many as 884 clients countrywide have been paying insurance premiums to Model Insurance totalling around R250 000 per month arguably without cover. It has since emerged that Model Insurance, owned by Pieter de Wet, was trading without the required license from the Financial Services Board (FSB). De Wet, meanwhile, alleges that the company is just five months from receiving it licence.
Knocking on the door of the FSB
At its recent Gauteng Regional Conference, the FIA reports that this needs to fall at the door step of the FSB and that the regulator needs to get involved at the early stages of some cases in order to prevent aberrant industry practices.
“The experiences that clients have allegedly suffered at the hands of Model Insurance are wholly unacceptable,” says Barry Taylor, FIA Chair of the Short-Term Insurance Executive Committee. But he warns that such incidents are on the rise in a market where consumers increasingly transact for low cost motor vehicle insurance products without the benefit of financial advice.
“While we applaud attempts by both insurer and insured to reduce the cost of their motor insurance premiums we would urge both parties to make sure they understand the terms and conditions – including exclusions – in their policy wordings,” he says.
“The first line of defence for a consumer transacting for short-term insurance is to transact with an FSB licensed insurer, preferably a member of the South African Insurance Association (SAIA). From an FIA perspective we would urge consumers to transact with the assistance of an FIA broker.”
How was Model Insurance allowed to operate in the first place? Surely there are controls and measures in place to ensure that all companies operating within the industry are doing so legally? As the industry regulator, the FSB has a duty to monitor and put a stop to these practices before they affect the public, no matter how big the industry is.
This is also a clear indication that there is very little awareness as to what the public needs to look out for when it comes to potential red flag situations. And when this is the case, scammers have a platform to take advantage of the public.
Editor’s Thoughts:
The FIA asks if the entire debacle could have been avoided with tighter enforcement measures? In a previous newsletter published by the FAnews, the FIA pleaded with the FSB to consider how regulation, shifting compliance deadlines, rising compliance costs and a pending remuneration review would impact the country’s risk and financial advisors. It goes beyond that. The FSB needs to implement measures and controls which avoids this situation, but it also needs to intensify its focus on consumer education which would bring these red flag situations to the public eye. This would completely avoid these situations. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughtsjonathan@fanews.co.za.
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