The FSCA has extended, for three years, the exemptions that allow certain independent intermediaries to be remunerated for performing activities that support the collection of insurance premiums.
The exemptions are contained in INS Notice 4 of 2020 and INS Notice 5 of 2020, respectively.
INS Notice 4 exempts certain entities from the requirements of regulation 4.2(3) of the regulations issued in terms of the Short-term Insurance Act. INS Notice 5 exempts certain entities from the requirements of regulation 8.2(2) of the regulations under the Long-term Insurance Act.
The provisions in the respective regulations state that an independent intermediary must have a separate bank account that may only contain money collected from policyholders – not any of the independent intermediary’s money or funds.
The original exemptions were due to expire in March 2022. But the FSCA extended their duration until the end of March this year.
The Authority has now extended the duration of the exemptions until 31 March 2027.
The extensions are contained in INS Notice 1 of 2024 (short-term insurance) and INS Notice 2 of 2024 (long-term insurance), which were published on 26 February.
Apart from the extension, the notices do not amend the exemptions granted in 2020.
This means that independent intermediaries who want to rely on the exemptions must comply with the conditions set out in sub-paragraph (2) of the 2020 notices (as applicable to short-term insurance or long-term insurance premiums).
It should be noted that the exemptions apply only to independent intermediaries whose primary business is not the rendering of services as an intermediary.
In addition, the policy for which the premium is collected must be ancillary or consequential to:
- another commercial agreement between the independent intermediary and the policyholder, or the policyholder and the person liable to pay the premium (other than an agreement related to the rendering of services as an intermediary); or
- a credit agreement.
The premium received, held, or dealt with by the independent intermediary must be ancillary to and form part of the collection of monies payable to the intermediary in respect of the abovementioned commercial or credit agreement.
Furthermore, an independent intermediary must:
- properly and promptly account to the relevant insurer for any premiums received;
- ensure that any premiums collected are appropriately ring-fenced from the intermediary’s other operational activities; and
- ensure that the relevant insurer has access to current, accurate, and complete data held by the independent intermediary about any of the insurer’s policyholders, as and when requested.
A failure to adhere to any of the conditions will result in the exemption no longer applying to an independent intermediary.
