Topic: What can we expect on the Regulatory front in 2022? Anything new on the cards?
INSURERS AND INTERMEDIARIES
Must walk the regulatory tightrope, together
By Lebogang Padi, Executive: Governance at Constantia Insurance
Insurers and intermediaries who are concerned about the volume of regulation would do well to reflect on the reasons for South Africa’s expansive regulatory approach.
From light touch to customer-centric
Two decades ago our regulation was light touch, resulting in many financial services providers (FSPs) playing fast-and-loose with their operating practices. Today we conduct business within a customer-centric regulatory framework that is designed to deliver positive outcomes for financial customers, whether they are in the low income or high net worth segments.
There are three reasons for the flood of amendments, codes, laws and standards we have seen over the past decade. First, there has been a shift in regulatory focus towards the customer. Second, progress is being made on entrenching Treating Customers Fairly (TCF) principles into law. And third, we are deep into a redesign of the financial services framework to accommodate twin peaks.
Getting to grips with twin peaks
Twin peaks is relatively new, and insurers, intermediaries and regulators are still getting to grips with the processes and structures needed for it to work. A positive from the new model is that the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) can focus on their respective mandates, with both regulators working towards a sustainable financial services sector that treats customers fairly.
Recent years have been dominated by the Retail Distribution Review (RDR) and pending Conduct of Financial Institutions (COFI) Bill; but from an operational perspective we expect amendments to the Policyholder Protection Rules (PPRs) to demand our attention in 2022. Insurers and intermediaries will be hard-pressed to bring their commercial operations in line with PPR, as well as comply with changes to outsourcing rules and premium collection, among others.
Big changes to governance
The COFI Bill will bring about a paradigm shift in market conduct regulation by introducing shared responsibilities across the product distribution chain and placing greater emphasis on governance. It will revise the legal framework to streamline the conduct requirements for financial institutions that are currently contained in a number of different financial sector laws. In addition, the COFI Bill will provide a consistent, strong and effective market conduct framework for all institutions performing financial activities.
Amendments to the PPR and other insurance regulations have already brought us nearer to the intended outcomes from the COFI Bill, so, by the time COFI is enacted, many of its requirements will already be built into our operating models. This legislation will further entrench the TCF principles in everything that insurers and intermediaries do, as we meet our shared objective of achieving fair outcomes for clients.
Need help? Just ask…
FSPs that are struggling with compliance, be it around interpretation or uncertainty over operating procedures, should not hesitate to approach the regulator for guidance. From the smallest intermediary to the largest insurer, you are all licensed on an equal basis and should be able to pick up the phone and say. “Excuse me, Regulator, we are struggling with this, please help”.
It is easy for firms, especially those in the SMME sector, to become disillusioned with the compliance burden. To our partners, we say: approach us if there is any aspect of the regulatory environment that you are struggling with, so that we can continue to collaborate and enable one another. We are all part of an evolving financial services framework in which we must unite to assist our respective partners. The industry’s legacy of arms-length relationships between intermediaries and insurers needs to be relegated to the history books.
We are all in this together
Insurers, intermediaries and regulators must travel the regulatory journey, hand-in-hand. We will only reach our final destination by working towards a shared vision of a sustainable financial services industry and protected customers.