7. South African Regulatory Environment

Question 1

Main purpose of SAM Pillars

Answer 1

QSD

Pillar I - Quantification
- stipulate quantitative requirements insurers must satisfy to demonstrate they have adequate financial resources
- main purpose of Pillar I to provide comfort to the PA insurer is able to meet policyholder obligations under a number of scenarios

Pillar II - Systems of Governance
- assesses the effectiveness of systems of governance (corporate governance and risk management) of the insurer
- main purposes of Pillar II:
- insurers demonstrate that risk management system is embedded in key business decisions (Use Test)
- enables the PA to assess insurer’s system of governance (ORSA, SRP)
- requires insurer to consider the entirety of processes and procedures employed to identify, assess, monitor manage and report on long and short term risks they face
- require insurers to determine suitability of OF under Pillar I (stress tests, scenario testing, reverse stress tests)
- in doing so, help insurers determine overall level of economic capital needed

Pillar III - Disclosure
- seeks to create transparency with aim of using market discipline in support of regulatory objectives
- main purpose is to require insurers to disclose how risks are managed

Question 2

National Credit Act (NCA)

Answer 2

Objectives of NCA
- promote competition and transparency
- all consumers have equal rights and protection thereof
- manage over-indebtedness of consumers, avoid reckless lending practices
- regulate credit bureaus, credit providers, debt counsellors
- formalise complaints mechanism

Purposes of NCA
- improve accessibility of credit market to prev disadvantaged customers
- enhance consumer rights and education
- better regulation of credit
- consistent treatment of consumers and credit providers
- responsible borrowing and elimination of reckless lending
- redress power balance between consumers and credit providers

Credit Life Insurance Regulation (effective: 09/08/2017)
Key components:
- maximum credit life cost and minimum benefit
- exclusions and cover limitations
- benefits in addition to minimum benefits
- annual charging of credit life insurance
- substitution of credit life insurance

Question 3

Policyholder Protection Rules (PPR)

Answer 3

1. Requirement for fair treatment of policyholder
2. Product design
   2A. Microinsurance and funeral policy product standards
3. Credit Life Insurance
4. Negative option selection of policy terms and conditions
5. Determining premiums
6. Premium reviews

Question 4

TCF outcomes - CPI APE

Answer 4

1. Customer confident TCF central to firm culture
2. Products designed and marketed to meet needs identified
3. Information provided to ph during and after contract clear
4. Appropriate advice - customers receive
5. Post-sales barrier - customers not faced with (unreasonable)
6. Expectations - customers provided with product as firm lead them to expect