PRESENTATION TO THE MEMBERS OF THE PARLIAMENTARY COMMITTEE ON FINANCE ON THE INITIATIVES TO ADDRESS THE NEEDS OF THE ASSISTANCE BUSINESS SECTOR BY THE FINANCIAL SERVICES BOARD: -INSURANCE: MASHUDU MUNYAI -FAIS: GERRY ANDERSON -FRIENDLY SOCIETIES: WILMA MOKUPO (no presentation, only Q&A) 06 SEPTEMBER 2005

2 OVERVIEW  -INSURANCE:  -Background  -Importance of Assistance Business Sector  -Policyholder Protection Rules  -Financial Advisory & Intermediary Services Act as it relates to Insurance  -Finmark Trust / Genesis-analytics Report: Regulation Of Assistance Business In South Africa  -Inspection Carried Out In Limpopo Province (Tzaneen) On Funeral Parlours  -FSB / Loa Consumer Education Booklet: Know Your Rights When Taking Out A Funeral Policy  -FSB / National Treasury Working Group On Assistance Business  -FSB’s Enforcement Committee establishment  -Co-operatives Act 14 of 2005  -FAIS:  -FAIS and Consumer Education

3 BACKGROUND  -PCOF hearings on abuses in Funeral Service Benefits Industry on 4 December 2003  -Lack of information to clients  -Problematic clauses in contracts  -Policyholder contact details  -Fraudulent practices  -Regulatory problems

4 IMPORTANCE OF ASSISTANCE BUSINESS SECTOR -Funeral cover is one of the most widely used financial services in South Africa -Ensures access to financial services for people of LSM 1-5 -Funerals are a pivotal social event in indigenous African Societies

5 POLICYHOLDER PROTECTION RULES  -Came into effect on 30 th September 2004  -Old PPR amended to bring it in line with the FAIS Act 37 of 2002  -Long-term PPR has new section - Part VI - deals with Assistance Business Group Schemes  -New section ensures that underwritten group schemes cannot easily change underwriting  -Envisaged will result in reduction in prevalence of unregistered insurance business

6 FINANCIAL ADVISORY & INTERMEDIARY SERVICES ACT AS IT RELATES TO INSURANCE  -Act came into operation on 30 th September 2004  -Drastic reduction in the number of assistance business complaints  -Implication that funeral parlours are registering under FAIS and are also underwritten

7 FINMARK TRUST / GENESIS-ANALYTICS REPORT: REGULATION OF ASSISTANCE BUSINESS IN SOUTH AFRICA  -National Treasury and FSB jointly considering Finmark Trust report  -Need arose from previous report “Making insurance markets work for the poor in South Africa”

8 INSPECTION CARRIED OUT IN LIMPOPO PROVINCE (TZANEEN) ON FUNERAL PARLOURS  -The FSB inspectors inspected approximately 30 funeral parlours  -Funeral parlours approached National Treasury for advice  -FSB convened meetings with representative bodies of funeral operators  -FSB delivered information presentations to SAFPA on compliance with Long-term Insurance Act and FAIS Act

9 FSB / LOA CONSUMER EDUCATION BOOKLET: KNOW YOUR RIGHTS WHEN TAKING OUT A FUNERAL POLICY  -FSB assisted the LOA to develop this book  -Aim to educate policyholders on their rights when taking out a funeral policy  -Books to be distributed by insurance companies to the members  -Books available in 11 official languages

10 FSB / NATIONAL TREASURY WORKING GROUP ON ASSISTANCE BUSINESS -FSB and National Treasury set up a working group -Consider the proposals in the Genesis: Analytics report -Tasked to look at the different licence options available for the assistance business industry

11 FSB’S ENFORCEMENT COMMITTEE ESTABLISHMENT  -FSB endeavours to set up an enforcement committee  -Committee will have powers to impose penalties on parties that contravene the provisions of the Acts  -At present the only enforcement action is prosecution  -Envisaged that the Committee will give the FSB more powers to regulate more effectively

12 CO-OPERATIVES ACT 14 OF 2005  -This Act allows for financial co-operatives to be registered  -Financial Services co-op can conduct long-term or short- term insurance  -Consider whether to move the Friendly Societies to the Co-Operatives Act

13 FAIS AND CONSUMER EDUCATION  -Intermediaries/Advisors engaged in the funeral policy (assistance business) sector fall within the FAIS regulatory framework;  -Special category created (Long-Term insurance category A);

14 FAIS AND CONSUMER EDUCATION ( FAIS AND CONSUMER EDUCATION (Continued)  -Dispensations granted:  a)Later registration date;  b)Exemption from qualification requirements;  -Interaction with stakeholders:  a)South African Funeral Parlour Association (SAFPA);

15 FAIS AND CONSUMER EDUCATION ( FAIS AND CONSUMER EDUCATION (Continued)  -b)Forum for Assistance Business (formerly GAF);  c)INSETA;  d)LOA’s sub-committee on assistance business;  e)Dedicated roadshows;

16 FAIS AND CONSUMER EDUCATION ( FAIS AND CONSUMER EDUCATION (Continued)  -Number of licenceholders;  -Consumer Education initiatives;  a) Dedicated staff;  b) Other Consumer Education initiatives radio/community  talks/brochures)

17 Questions (including Friendly Societies)