Amended policyholder protection rules for the group insurance industry came into effect in October last year, in the interests of keeping policyholders better informed. But, says Michele Jennings, CEO of Sanlam Group Risk, this requires so much information to be required to individual members that they will likely just be confused or overwhelmed.
"We all fully subscribe to the idea that individual members of a group risk policy need to know more about what they are covered for by their employer," Jennings said at a recent media briefing.
She cited a recent case where a company was liquidated, and the members of the employer's group risk policy did not know or realise that their membership to the policy had been terminated.
The rules make provision for the policyholder to convey the required information or communication to the individual members.
"We have seen mixed responses from employers and brokers. We deal with a lot of small employers who do not necessarily have the capacity to do all that is required," said Jennings.
'Way too much'
"Some employers said they will take full responsibility to convey the information, while others say the task is way too much for them. Therefore, from an insurer's point of view, we would have to have different options available for employers."
In her view, many employers might not realise the mass of information involved.
At the same time, the ultimate responsibility to monitor compliance with the rules, is placed with the insurer.
"At this stage the insurer is absorbing the extra costs involved - for Sanlam Group Risk this will probably mean an extra R10m in costs per year," said Jennings.
She said it will be very difficult for insurers to earn extra money for doing all of this for employers.
Jennings said one of the big changes in the rules are that in the past an intermediary could assist members of a group risk policy. Now the insurer must deal directly with the individual insured employee and beneficiaries unless the employee agrees that that the insurer can work via the employer.
"Often members do not understand what the rules expect from insurers. We think this will ultimately lead to a lot more queries coming through to insurers," said Jennings.
Another aspect of the new rules she pointed to is that, where an employer terminates a group risk policy, the insurer needs to notify the relevant authority - including of what the material differences are with the new policy opted for.
Not only does Jennings think this could lead to some uncompetitive behaviour, but she thinks it could even lead to the group risk insurance industry having very little differences between policies available.
"We have had to put a lot of effort into meeting the PPR requirements, including hosting road shows. We are now required to keep the required information of 1.2 million individual members of group risk policies updated all the time," she said.
"We have tried to find innovative ways to address the challenge."