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Monday, September 1, 2008
Regulations await

The Insurance Laws Amendment Bill, 2008, debated in Parliament 24th June, should be promulgated during the latter part of the year following a final public hearing on August 5th. The industry has settled its differences as far as it can and now hopes to clear up any outstanding issues in the attendant regulations when they are being drafted, following promulgation of the Act.

Most players are evidently ‘comfortable’ with the Bill as it sits, although a few individual companies are unhappy with certain aspects, such as the way the Bill proposes to deal with the demarcation of health business (as between the insurance companies and medical schemes).
According to Treasury the Bill addresses “urgent technical and regulatory issues in both the Long-term and Short-term Insurance Acts”. The amendments are contained in one Bill as many of the provisions appear in both Acts and need common reform.
The law seeks to:
• close certain regulatory gaps;
• effect improvements to certain provisions of existing legislation, and
• update outdated references.

The amendments:
• Expand the rights and reporting obligations of independent risk assessors such as auditors and statutory actuaries, to enhance transparency and corporate governance of client funds, thereby strengthening consumer protection and industry oversight;
• Improve risk management rules for insurers in a move towards risk based supervision, with the main objective of promoting a more stable financial system, particularly relevant against the backdrop of recent financial market turmoil, as well as an improved allocation of regulatory resources in the esteemed Financial Services Board, the FSB, allowing for more effective supervision of our financial services sector;
• Protect consumers by regularising and clarifying the relationship between an insurer on the one hand, and an outsourced person on the other, who provides service functions between insurer and client in the instance where the insurer’s liability may be varied by the insurer giving authority to the third party to take on (or manage) their insurance business with a client on their, the insurer’s, behalf;
• Provide additional regulatory protection for consumers of assistance business policies; and,
• Clarify the regulatory demarcation of products between health and financial services to ensure alignment between health and financial sector policy.

Significant amendments to the Short-term Insurance Act 1988 deal with:

- Demarcation between health and medical schemes business;
- Binder agreements; and,
- Enabling provisions for planned future introduction of Financial Condition Reporting.

Copyright © Insurance Times and Investments® Vol:21.8 1st September, 2008
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