The FSCA is exempting FSPs, key individuals and representatives who operate in the credit life and funeral insurance space from some of the Fit and Proper Requirements.
The reason for the exemptions is the “unintentional complications” that have arisen because of the reclassification of classes and sub-classes of insurance business in terms of the Insurance Act.
In a communication this week, the FSCA said the Determination of Fit and Proper Requirements for Financial Services Providers (Board Notice 194 of 2017) was amended to ensure alignment between the sub-categories of financial products in the Fit and Proper Requirements and the new classes and sub-classes of insurance business under the Insurance Act.
Despite this, “it was recently identified through requests for exemptions and queries received, that some of the reclassification that took place under the Insurance Act inadvertently resulted in certain complications in the context of the Fit and Proper Requirements”.
The “Exemption of particular persons from compliance with certain competency requirements, 2022” Notice was published on 28 February and is effective from 26 June 2020.
The FSCA did not say when the “temporary” exemption would end.
It said the exemption was designed to ensure “a fair transition to the new classification of financial products”.
The “complications” concern credit life insurance and funeral policies.
The introduction of the Insurance Act means credit life insurance policies must be written under the credit life class, which falls under life insurance. Previously, these policies could be written under the Short-term Insurance Act. As a result of the reclassification, FSPs, representatives and key individuals who are not also authorised to operate under the long-term insurance B1 or B2 sub-categories are no longer authorised for credit life policies.
All funeral policies below R100 000 now fall within the funeral class in the Insurance Act. Previously, FSPs offering policies between R30 000 and R100 000 were licensed under long-term insurance sub-categories B1 or B1-A. But this is no longer the case; these FSPs, and their key individuals and representatives, must be authorised for long-term insurance sub-category A.
What are the exemptions?
The exemptions apply to credit life and funeral insurance providers as follows:
Credit life products
An FSP and its representatives, excluding a supervised representative, approved for short-term insurance personal lines are exempted from the class of business training, experience and qualification requirements that apply to long-term insurance sub-category B1 and/or long-term insurance sub-category B2.
A key individual approved in respect of short-term insurance personal lines is exempted from the class of business training and qualification requirements that apply to long-term insurance sub-category B1 and/or long-term insurance sub-category B2.
Funeral products
An FSP and its representatives, excluding a supervised representative, approved for long-term insurance sub-category B1 are exempted from the experience requirements applicable to long-term insurance sub-category A.
The conditions that must be met
The above exemptions will be granted only if the following conditions are met:
- Within six months after the publication of the Notice, the FSP must notify the FSCA that it renders financial services in respect of credit life and/or funeral products and ask the Authority to amend the sub-categories of financial products for which the FSP is authorised to render financial services to include:
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- Long-term insurance sub-categories B1 and/or B2, if the FSP sells credit life products; and/or
- Long-term insurance sub-category A, if the FSP sells funeral products.
- At the same time, the FSP must also ask the FSCA to approve for long-term insurance sub-categories B1 and/or B2 and/or A, the key individuals who are already approved for:
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- Short-term insurance personal lines (where services are rendered in respect of credit life products); and/or
- Long-term insurance sub-category B1 (where funeral products are sold).
- The FSP should ask the FSCA to remove the financial product for which approval is no longer required.
- Furthermore, within three months after amending the sub-categories of financial products for which the FSP is authorised, the FSP must submit to the FSCA an updated central representative register that correctly reflects long-term insurance sub-categories B1 and/or B2 and/or A for which its representatives are appointed to render financial services in relation to credit life and/or funeral products.
When submitting the above requests, an FSP will not have to pay the prescribed fees that are normally charged when applying for the approval of a key individual, the amendment of a mandate, or changing the products or services it is authorised to provide.
Supervised representatives
Note that there are separate exemptions for supervised representatives.
Credit life products
Supervised representatives who comply with the class of business training, experience and qualification requirements for short-term insurance personal lines are exempt from these requirements for long-term insurance sub-categories B1 and/or B2.
Funeral products
Supervised representatives who comply with the experience requirements for long-term insurance sub-category B1 are exempt from the class of business training, experience and qualification requirements for long-term insurance sub-category A.
