BROKERS MUST TAKE CHARGE OF THE SUBJECTIVITY DEBATE
- BEE NEWS
- Mar 11
- 5 min read
Gareth Stokes | 10 March 2025
Policy subjectivities remain a major bugbear for South Africa’s short-term insurance intermediaries. The term refers to inconsistencies across the insurer-set conditions or requirements that must be met for cover to apply, with different interpretations contributing to uncertainty for brokers and their clients.
A condition and exclusion free-for-all
Inconsistent policy wordings, varying exclusions, and underwriting discretion are making it difficult for intermediaries to provide clear, reliable guidance to insureds, let alone compare quotes across primary insurers. And the problem does not end there. In the past, multi-insurer placements, typical for large commercial projects, were more predictable because the secondary insurers typically followed the lead underwriter’s terms. Nowadays, each insurer may choose to apply its own exclusions and conditions.
Sam Williams, Head of Legal and Regulatory Affairs at the Financial Intermediaries Association of Southern Africa (FIA), highlighted policy subjectivities as a top challenge for the association’s non-life insurance broker members. “We have been working with the Financial Sector Conduct Authority (FSCA) for over two years to try and find a solution to this problem; it goes beyond grid exclusions to include challenges around cyber, climate, and a growing list of policy exclusions,” she said during a regulatory update to the Natsure Annual Partner Conference, held in Pretoria recently.
Some commentators felt the South African Insurance Association (SAIA) was best placed to address the policy subjectivities issue; but the association has declined to get involved, relying on the often used ‘such discussions would contravene the country’s competition legislation’ defence. The FIA decided to take a slightly different approach, engaging the FSCA on the possibility of South Africa developing a standard policy wording framework similar to that used by insurers in the United Kingdom (UK). The FSCA has, in turn, met with the Competition Commission to test the waters on the FIA’s proposal.
Intermediaries to lead the discussion?
“For our members to give the best possible advice to their clients, it is paramount that we address the lack of clarity that emanates from recent policy wording changes,” Williams said. Aside from policy subjectivities, the non-life insurance sector is also struggling with the protection gaps created by the blanket withdrawal of insurance covers for pandemic and other uninsurable risks. After discussing the matter with government and SAIA, the FIA feels intermediaries should take the lead by documenting an approach and then seeking industry comment.
The complex environment described in the preceding paragraphs explains recent evolutions in risk advice; brokers have had to graduate from advising on insurance solutions to advising on risk posture. “We cannot just be advice givers anymore; we really have to focus on the risk management element,” Williams said. The association is leading efforts in this space, with plans to introduce four CPD-accredited risk management training modules for its members. These modules will cover risk management from both the brokerage and client side and give brokers an edge in identifying, analysing, and mitigating risks.
The regulatory update reflected on a number of general legislative changes that apply across the advice disciplines that FIA members engage in. First and foremost, the FIA is lobbying the Department of Employment and Labor (DEL) on the financial sector employment equity targets communicated by the DEL on 11 February 2025. “These targets, which impact entities employing 50 or more employees, showed a substantial increase from what was presented in February last year,” Williams said. Firms will have five years to comply.
An impossible five-year target
The FIA is concerned that intermediary businesses are being subject to the same targets as banks and insurers. It has since completed a benchmarking exercise comparing some of its larger members against the economically active population, and submitted this research to the DEL. “Transformation is a fundamental imperative for the FIA and for South Africa as a whole; but we cannot be expected to reach the targets that the DEL are proposing from where we are today,” Williams said. The DEL has agreed to a bilateral engagement with the FIA on the issue.
You cannot discuss financial sector regulation without the Conduct of Financial Intermediaries (COFI) Bill receiving some airtime. According to Williams, National Treasury has been distracted by other priorities, not least of which tackling the Financial Action Task Force (FATF) grey-listing sticking points. “COFI is going to be a more solid change for the industry once it comes; it is going to move us towards a more outcomes based approach to legislation, and a less prescriptive regulatory focus,” she said.
The delay in tabling COFI in Parliament is a setback; but the FSCA does have wide powers under the Financial Sector Regulation (FSR) Act to push ahead with Conduct Standards. The regulator has established a COFI Transition Working which is progressing various matters, including Fit and Proper Requirements through a dedicated sub-committee. These committees are considering the next steps to progress from the current Financial Advisory and Intermediary Services (FAIS) Act to a new COFI dispensation.
Welcome respite from the Omni CBR
It seems the regulator needs clarity on the compliance and Fit and Proper requirements under COFI before they can finalise the COFI licensing framework. The FIA is confident that 80% of the issues will be addressed before everything comes back to the intermediary industry for comment.
Another pending regulatory intervention is the so-called Omni Conduct of Business Reports (Omni CBR). The FSCA has since distanced itself from the quarterly reporting requirement and will revisit the scope of the returns in their entirety. The fact the regulator is considering a more risk-based approach will not significantly reduce the eventual compliance workload, which will have to be shared across the business.
Williams encouraged intermediaries to pay close attention to the Guidance Note on Direct Marketing recently published by the Information Regulator. This note offers guidance to responsible parties on how personal information should be processed in compliance with a number of conditions for its lawful processing, as well as the overall interpretation of the Protection of Personal Information Act (POPIA) in relation to direct marketing.
Compliance or bust
“As brokers, you should familiarise yourselves with the contents of this notice because you do not want to [err in an environment where] regulators are looking for quick wins,” she concluded. For those feeling overburdened or overwhelmed, the closing advice: “Rather have some awareness of emerging regulations, and familiarise yourselves with them, than being caught completely unaware and falling foul of the regulator; the cost of failing to comply is far greater than the cost of compliance.”
Writer’s thoughts:
Policy subjectivities and the growing list of cover exclusions are making it nearly impossible for South Africa’s short-term brokers to operate effectively. Should intermediaries take the lead in demanding standardised policy wordings?
‘Disclaimer - The views and opinions expressed in this article are those of the author(s) and not necessarily those of the BEE CHAMBER’.
