Wednesday, January 26

FSCA Criticizes High Premium Hikes on Funeral Policies


The Financial Sector Conduct Authority (FSCA) on Wednesday expressed concern about high premium increases implemented by insurers on funeral policies.

While the financial watchdog says it recognizes the impact of Covid-19 on death rates and funeral policy claims, it reminded insurers of their obligations related to premium increases, noting that it still expects insurers to guarantee. fair results for policyholders.

Moneyweb InsiderWELL-INFORMED PERSONGOLD

Subscribe to get full access to all of our shared and untrusted data tools, our award-winning articles, and support quality journalism in the process.

“Insurers must ensure that, in accordance with Rule 1.2 of the Policyholder Protection Rules (PPR) issued pursuant to Section 62 of the Long-Term Insurance Act, 52 of 1998 (LTIA), they act with the due skill, care and diligence in raising premiums, ”the FSCA said in a statement.

“It is the FSCA’s view that premiums must be priced correctly at the inception of the policy so that any increases that may be implemented result in fair results for policyholders, and that the policy continues to perform as expected.”

The regulator adds that it has received complaints that some insurers are increasing premiums more than once for the same policy within a 12-month period, although the terms and conditions only allow increases on the policy anniversary.

“This violates the requirements of Rule 15 (1) of the PRPs that establishes [that] a premium payable under a policy can only be reviewed if the policy provides for a review, and [also] it establishes the frequency and circumstances in which a review will take place, ”noted the FSCA.

According to Rule 1.4 (e) of the PRPs under Fair Treatment of Policyholders, “an insurer must have adequate policies and procedures to achieve fair treatment of policyholders. Fair treatment of policyholders encompasses the achievement of at least the following outcomes: policyholders receive products that perform as the insurers or their representatives have kept them waiting, and the associated service is both of an acceptable standard and of what has been expected of them. kept waiting ”. .

The FSCA says that the premiums set by insurers must be actuarially sound and in line with Section 46 (1) (a) of the LTIA which states that: “A long-term insurer shall not write any particular type of policy to long term unless the legal actuary is convinced that the premiums, benefits and other values ​​thereof are actuarially sound ”.

The watchdog has also noted that some of the recent premium increases may be related to the historical books of companies that had prices lower than expected since the inception of the policies.

Therefore, it is the opinion of the FSCA that “if policies were not priced correctly at the inception of the policy and then exorbitant increases are implemented due to the impact of Covid-19 or underwriting losses, this would result in unfair results for policyholders. ”.

The FSCA added that it expects insurers intending to increase premiums on existing policies to consider existing requirements and follow the appropriate processes. In addition, insurers must be able to demonstrate that they are complying with the provisions of the LTIA, particularly PRPs, and that they treat their customers fairly.

Palesa Mofokeng is a Moneyweb intern.


www.moneyweb.co.za

Leave a Reply

Your email address will not be published.