FSCA releases proposals on the future regulatory framework for collection of insurance premiums
Legal Development11 April 201911 April 2019
Insurance & Reinsurance
On 9 April 2019, the Financial Sector Conduct Authority ("FSCA") published a communication notice ("Communication Notice") indicating that it had published a position paper on proposals for the future regulatory framework for the collection of insurance premiums ("Position Paper").
The Position Paper follows the FSCA's 14 December 2018 publication entitled "Update on the future of the premium collection regulatory framework under the Short- and Long-term Insurance Acts", and the various industry engagements held by the FSCA during early 2019.
The Position Paper addresses various aspects relating to the collection of premiums, and sets out 5 key proposals:
Identification of premium collection related activities and principles for remuneration: The FSCA proposes that specific activities related to premium collection should be carved out from the definition of "services as intermediary", and classified as outsourced activities. The classification of such activities as outsourced activities would enable insurers to remunerate persons performing these activities by means of an outsourcing fee.
Establishing criteria for 'qualifying intermediaries': The Position Paper proposes that third party premium collection should only be performed in very limited instances by certain types of third parties, being “qualifying intermediaries”, who meet specific operational and systems requirements in order to promote innovation, fair competition and financial inclusion.
Treatment of premiums as trust monies: It is proposed that the requirement that independent intermediaries collect premiums into a separate bank account be replaced with a requirement that premium monies be held in a statutory trust account, and be subject to specific accounting and auditing requirements.
Reduction of premium remittance period: The Position Paper proposes that the time period within which premiums must be paid over to the insurer should be reduced from fifteen (15) days after the end of the month within which premiums are collected to three (3) working days from the date on which such premiums are collected.
Interim approach to remuneration for direct collections: It is proposed that in instances where independent intermediaries collect premium directly into the insurer's bank account, the FSCA grants a general exemption (subject to specific conditions such as fee caps or ranges) to insurers, exempting them from having to comply with Commission Regulations when remunerating intermediaries for performing such functions. Specific input has been requested by the FSCA in respect of this proposal.
The FSCA has invited interested parties to submit written comments on the proposals outlined in the Position Paper by no later than 10 May 2019.