What does Twin Peaks Mean for the ST Insurance Industry? ISMAIL MOMONIAT DDG: TAX AND FINANCIAL SECTOR POLICY (email: ismail.momoniat@treasury.gov.za) THE INSURANCE CONFERENCE 2012, Sun City - PowerPoint PPT Presentation

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What does Twin Peaks Mean for the ST Insurance Industry? ISMAIL MOMONIAT DDG: TAX AND FINANCIAL SECTOR POLICY (email: ismail.momoniat@treasury.gov.za) THE INSURANCE CONFERENCE 2012, Sun City

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What does Twin Peaks Mean for the ST Insurance Industry? ISMAIL MOMONIAT DDG: TAX AND FINANCIAL SECTOR POLICY (email: ismail.momoniat_at_treasury.gov.za) – PowerPoint PPT presentation

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Title: What does Twin Peaks Mean for the ST Insurance Industry? ISMAIL MOMONIAT DDG: TAX AND FINANCIAL SECTOR POLICY (email: ismail.momoniat@treasury.gov.za) THE INSURANCE CONFERENCE 2012, Sun City


1
What does Twin Peaks Mean for the ST Insurance
Industry? ISMAIL MOMONIAT DDG TAX AND
FINANCIAL SECTOR POLICY (email
ismail.momoniat_at_treasury.gov.za) THE INSURANCE
CONFERENCE 2012, Sun City
National Treasury 12 June 2012
2
G20 Response to 2008 Financial Crisis
  • G20 focus has been on strengthening
    macro-prudential and micro-prudential measures.
  • Financial Stability Forum transformed into
    Financial Stability Board.
  • South Africa represented on Fin Stab Board.
  • Focus on systemically important financial
    institutions (SIFIs), both global and domestic.
  • Initial focus on banks, but now also on insurance
    sector.
  • G20 has also adopted principles on consumer
    protection and on innovative financial inclusion
  • Three pillars of protection, access and education

3
South Africas Response
  • Greater focus on macro-prudential risks and
    establishment of Financial Stability Oversight
    Committee (FSOC) jointly chaired by Min of Fin
    and Governor of SARB.
  • Shift to twin peaks system of regulation, with
    prudential supervisor under SA Reserve Bank, and
    Fin Services Board transformed into a market
    conduct supervisor.
  • Operational independence of supervisors.
  • New legislation for twin peaks in 2013, but
    already implementing many measures even as we
    prepare for twin peaks
  • Complementary measures on consumer education and
    financial inclusion

4
Implications for ST Insurance Industry
  • Prudential supervision will be strengthened
    through implementation of SAM framework.
  • Strengthening supervision over groups.
  • New legislation this year includes upcoming
    Insurance Laws Amendment Bill, Financial Services
    General Laws Amendment Bill etc
  • Pending legisalation next year to implement twin
    peaks system
  • Pending legislation next year to improve the
    design of the ombuds system and ensure that it
    operates independently, without any interference,
    and includes governance and funding reforms

5
PRUDENTIAL COMPLIANCE IS CRITICAL, BUT FOCUS
MUST BE ON CUSTOMERS!!!
  • NT view is that the ST Insurance market conduct
    practices are poor.
  • NT view is that our supervisors must be much
    TOUGHER than they have been in the past.
  • Insurance will only be exempted from the Consumer
    Protection Act if the industry adopts HIGHER and
    TOUGHER standards.
  • Industry must EARN the right to exemption, by
    demonstrating superior market conduct practices.
  • Why should government consider compulsory
    insurance for say motor vehicles if the industry
    is not transparent about its costs and claims
    procedures?
  • Has the industry really looked at how it can
    provide more affordable policies?
  • TCF is just the start, and business models must
    do more to incorporate its principles, and break
    from past practices

6
NT CONCERNS
  • Most ST insurance companies are not really
    prepared to incorporate TCF principles in their
    practices, and are still stuck to a
    compliance-based approach
  • ST Insurance industry is behind the curve on its
    focus on fair treatment of customers.
  • Dubious industry practices and defaults for
    example
  • only revising motor car value if prompted,
    compulsory alarm provisions for households etc
  • principles of proportionality and fairness not
    applied in many cases, as system is designed to
    reject claims in total
  • NT considering comments on health insurance med
    schemes demarcation - if insurers want to compete
    then must do so on same terms as medical schemes
    no cherry picking good risks!

7
Obliging greater transparency and
consumer-friendly approaches
  • NT believes that market conduct supervisors must
    move swiftly to oblige public disclosure on
    relevant information, including on claims
    received, claims rejected for each company.
  • Supervisors will have the powers to force
    compliance and higher standards.
  • We need more simplified products with standard
    terminology and comparability.
  • Defaults must be changed to support customers
  • Ensuring that all players are FIT and PROPER at
    ALL times

8
Some Current Challenges
  • How does the industry become more accessible to
    the low-income market?
  • Micro-insurance?
  • Does the industry have more affordable products
    for the small businesses?
  • How can the ST industry commit to tougher
    Financial Sector Charter targets?

9
Reforming the Ombud System
  • NT does not believe that industry ombud is
    sufficiently independent in ST Insurance
    Industry.
  • Governance and funding over ombud must be free,
    and SEEN TO BE FREE, from any interference.
  • NT considering a system of compulsory levies to
    fund the operation of ombud offices, together
    with minimum norms and standards.
  • Appointment and re-appointment processes of ombud
    must be free from interference.
  • The number of complaints going to the ombud
    reflects on the failings of internal complaints
    procedures of companies.

10
Beyond Mkt conduct Has ST Insurance really
transformed to reflect the new SA realities?
  • The ST Industry appears to be stuck in past
    practices.
  • Is the industry really open to new challenges
    change?
  • Are ST insurance products appropriate for the
    needs of township dwellers, funeral needs,
    younger market?
  • Are pricing models really free from redlining?
    Who subsidises who?
  • Is there sufficient new blood entering the
    leadership ranks in the insurance industry?
  • Can we open up a dialogue to reform and modernise
    the short-term insurance industry?

11
Thank you
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