The Financial Sector Conduct Authority's (FSCA) market conduct steering committee will engage with financial sector representatives to chart a way forward following developments at Momentum, said a representative of the regulator.
The insurer was thrust into the spotlight last week following reports that it would not pay out a death benefit for a client, Nathan Ganas over non-disclosure of an illness. Ganas was gunned down in a hijacking – his death was not related to his high blood sugar levels.
Following public outcry Momentum will pay out the death benefit to the Ganas family and has changed its policy to pay out death benefits (limited to R3m) in the case of violent crime, regardless of medical history.
Among those who welcomed the decision by Momentum was Treasury's Deputy Director General Ismail Momoniat. He said the development at Momentum creates a basis for engagement with industry on possibly tightening standards to treat customers better.
Momoniat said the Twin Peaks model of financial regulation requires a big culture change from financial institutions. Earlier this year former Finance Minister Nhlanhla Nene launched two authorities - the Prudential Authority and the FSCA – which are part of the Twin Peaks model. The regulators respectively reduce potential threats to the financial system and provide better protection to financial customers.
The Prudential Authority provides prudential supervision of banks and insurers by ensuring they are financially sound and step in to protect customers against the failure of these financial institutions to meet their commitments.
The FSCA is concerned with the conduct of these financial institutions, explained Caroline da Silva, the divisional executive for regulatory policy. "The aim of the conduct authority is to ensure that financial institutions treat their customers fairly," she explained.
"The vision of the conduct authority is to have a thriving financial sector, which is efficient and that customers can trust, and feel that they are treated fairly, are empowered and are protected," said da Silva.
Da Silva clarified that the FSCA is not a consumer watchdog, and does not resolve claims of institutions – there is an ombudsman system for that. The conduct authority learnt of the Momentum matter through media reports on Saturday, she said.
The role of the conduct authority is to consider the complaints raised with the ombudsman system – to see if there are trends in what customers are complaining about and if complaints are being resolved and potentially if the conduct of the industry as a whole should be changed through the setting of new standards, she explained.
FSCA reached out to Momentum - not to resolve the claim – but to determine what Momentum is doing to treat customers fairly.
As a result, when Momentum introduced the policy change - it was not just for one customer- but rather it was a change in the interest of fairness and the treatment of all customers based on customer expectations of the industry, explained da Silva. "Momentum took a good step in the interest of fairness."
Da Silva clarified that the conduct authority considered the issue of the claim to see what can be learnt from it in terms of treating customers fairly, in an effort to grow confidence in the financial sector, without undermining the efficiency of the sector.
She said that specifically in the insurance industry disclosures are important as it drives "good behaviour, good patterns, good underwriting and good pricing".
Based on this case, the conduct authority will engage with the industry to see how many other claims of violent crimes were rejected based on an unrelated health condition, and see how to change practices in the industry to "drive better confidence" in the sector.
As a regulator, the FSCA owns and writes all regulations which govern the industry. Changes that may be introduced following the engagement process include changes in legislation, changes in policy wording, or even better customer education and a whole range of changes to give effect to better outcomes, she said.
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