Sanlam Developing Markets Limited and Channel Life Limited were fined R2 million and R1 million respectively for inadvertently contravening the regulations regarding maximum commissions payable.
During the period 1 November 2008 to 21 June 2013, these companies remunerated intermediaries in excess of the maximum commission as set out in Part 3 of the Regulations under the LTI Act. This was due to a system error.
“As mitigating circumstances, the Registrar considered that Sanlam Developing Markets and Channel Life fully co-operated with the investigation and have put measures in place to rectify the contravention in that it addressed all the compliance issues relating to the matter and amended its processes where required. The Registrar also considered that the contravention was as a result of a bona fide oversight in the design of the system.”
It is not clear from the media release whether overpaid commission would be clawed back from advisors.
The overpayments would not result in any loss to policyholders, thus no further action would be required to compensate them for any losses.
It appears that the problem occurred where a policy had multiple lives assured and multiple premiums. The main life assured would pay a relatively low premium, normally for the maximum term. When other lives assured were added, such as adding his parents, the premium for the additional lives assured would be higher, but the term substantially shorter than that of the main life assured.
The system error apparently calculated commission on the total premium over the full term of the policy, rather than on the individual components, resulting in commission overpayments.
