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Life Assurance
Wednesday, October 1, 2008
Consumer benefitpeter

The introduction of new commission structures from 1st January 2009 has got to be the biggest shake up the life industry has faced since the adoption of FAIS and the requirement for compliance officers. From the consumers’ point of view it will be the most noticeable.

Essentially the old commission arrangement will be split in two, with only half being paid upfront. This will immediately allow for a greater portion of premiums to go directly into investment funds and start earning a better return from Day 1. It will improve potential early surrender values and, paradoxically because of this, might actually reduce the number of surrenders.
There is some concern that life assurers will battle to meet the deadline for the adoption of the new rules. But the move has been anticipated for quite some time, and Old Mutual, for example, says that its plans are well on track to comply with the new regulations by the due date.
Comments Peter de Beyer, Managing Director of Customer Solutions at Old Mutual, “We recognise that financial advisers and brokers have played a pivotal role in helping South Africans to realise their financial goals based on a holistic plan. And we will continue to support them to ensure that they are able to provide their invaluable advice to consumers, and to comply with the new regulations.”
In this light Old Mutual says it is equipping its intermediaries to deal with the impact of the new regulations introducing a combination of lower upfront commission and commission earned as and when premiums are paid.
The regulations also stipulate new minimum early termination values on recurring-contribution savings plans commencing after the implementation date. Old Mutual cautions consumers to bear in mind that although early termination values have been improved, investing over the long term still brings the best results. Consumers are encouraged to develop a comprehensive financial plan in conjunction with accredited advisers, to be better equipped to deal with any sudden, unforeseen financial pressures.

Copyright © Insurance Times and Investments® Vol:21.9 1st October, 2008
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