Life industry moves on commissions probe

An LOA statement noted with concern media reports that some consumer credit insurance member companies were allegedly breaking remuneration and commission regulations set out in the Long-term Insurance Act. Gerhard Joubert, CE of the Life Offices’ Association (LOA), said the life industry viewed the allegations about members active in the consumer credit insurance market in a serious light. It said it did not condone non-compliance with the law or the industry organisation’s code of conduct. The LOA has ‘already started a process of investigation’ into various allegations that have popped up in media reports, it said. Joubert said that the association decided at a recent meeting to launch an inquiry into the consumer credit insurance market, says a report on the FIN24 site. Former Long term insurance ombudsman, Judge Peet Nienaber, will head the investigation. Full report on FIN24 site

Joubert said companies active in consumer credit insurance had pledged their full co-operation. He added their investigation would be running concurrently with a Financial Services Board investigation into compliance with existing regulatory requirements, notes Business Report. ‘At this stage it is envisaged that the inquiry will cover all consumer credit insurance marketing and distribution practices, including incentivisation strategies, which may drive behaviour that impacts negatively on consumer protection, and will seek to identify any gaps in the regulatory environment,’ said Joubert. Media reports have fingered a top LOA office bearer in the scandal, but, according to Business Day, Joubert would not disclose the name of the official, preferring to do so once the investigation was completed. The official, who also heads a life company, is alleged to have been acting in cahoots with a sister firm in the motor industry to pay motor dealerships commission far in excess of permitted maximums, to the detriment of consumers who take out insurance when buying a car. Joubert conceded the issue was likely to further dent the image of an industry smarting from many years of waning consumer confidence. Full report in Business Report Full Business Day report

The move is seen as unusual because insurance companies have generally defended their own, suggests a Moneyweb report, but quotes Joubert as saying that the life industry views the allegations in a serious light. Regent Life, a division of Imperial Holdings, has been in the spotlight following allegations that it paid motor dealerships far more commission than permitted to sell consumers short and long-term insurance. Also this month, Insurance Times & Investments has run reports on questionable practices around the selling of insurance by car rental companies. The LOA said in it does not condone non-compliance with the law or the industry organisation’s code of conduct. The LOA will involve other interested parties in its inquiry, with the ultimate aim ‘to achieve more appropriate consumer protection in the consumer credit insurance market’, Joubert said. Full Moneyweb report Full ITINews report

The revelations focused on how Regent Life sidestepped various laws which resulted in Imperial\'s nationwide car dealership conglomerate being paid excess commissions. In the process, credit life premiums for periods as long as five years were charged as one lump sum to finance agreements costing policyholders thousands of rands in additional interest payments. The commissions, which were as high as 50% of premiums, were also a contravention of a code of conduct of the Life Offices Association (LOA), which represents most life assurance companies. Saturday Argus reports that the National Treasury and the FSB are to be kept informed of the progress and results of the inquiry. The credit life industry is also being investigated by the FSB. Full Saturday Argus report