Insurance Bill [B1-2016]: public hearings

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Finance Standing Committee

07 February 2017
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

Public hearings were held by the Committee on the Insurance Bill. Stakeholders were invited to give comment on the Bill and six different parties presented oral submissions. The South African Insurance Association (SAIA) believed that the Bill had to be processed urgently as it contributed to financial stability and governance provisions in the insurance industry. The Association for Savings and Investment South Africa (ASISA) also believed that the Bill had to be passed with urgency. Through its membership it advocated for financial inclusion of small business partners and the Bill would assist in the process. The Centre for Applied Legal Studies (CALS) focused its presentation on the link between the provision of Human Rights and the insurance industry. They believed that insured persons had to be protected by the law and not exploited as it happened before.

Members asked whether international reinsurance providers could pay a form of tax to contribute to the South African economy. They also wanted more information on proposed agri-insurance products which would assist in small business farmers where losses occurred due to natural phenomena. Members encouraged consultation between presenters and National Treasury which would help to outline specific legislation which could be integrated into the Bill. Financial inclusion, de-racialization and the transformation of the insurance industry was high on the Committee's agenda before the passing of the Bill. Only 1% of the entire insurance industry of South Africa was controlled by black people and only 4.6% of insurance assets were managed under black companies. These statistics were not representative and members suggested finding ways to change it through this legislation.

The Black Business Council (BBC) felt that the Bill could not be passed as it was as it did not address the black business micro-insurance industry. Costs were huge at small entities and the costs of reviewing agreements and external auditing costs were adding pressure on the finances of small black insurance companies. Popcru Group of Companies (PGC) represented a group of black-owned insurance companies which included Workers Life, Bophelo Life, Nestlife and Union Life. These companies felt that the Bill did not pass constitutional muster as it failed to address the historical inequalities embedded in the financial sector. It urged the Committee to include aspects in the Bill which would allow for smaller black owned companies to have access to the industry by lowering capital requirements and being more proactive with shortening licensing time frames.

Another individual presented his case to the Committee for amendment to the Bill. Mr Gerhard Cilliers petitioned Parliament to make changes to the Bill which would see a clause be created to make it mandatory for own occupation disability benefit cover to include a whole life option for current and new policies and to make this retroactive for previous policies at the option of affected policy holders. He had a policy at Old Mutual and was forced to resign from his occupation because of disability. The policy covered him for a 10 year term in which he received 70% of his salary. Little did he know that the cover would only last for 10 years and not for his whole lifetime. He took the matter forward to the Ombudsman but lost the case and was now seeking to amend legislation through his petition.

Members believed that the diagnosis of PGC and BBC were correct in terms of the lack of transformation in the insurance and financial sector. Even the figures were correct. The 1% referred to the owners of insurance industries and the 4.6 % referred to the assets under management which were under black asset managers. Yet all of the stakeholders were tiptoeing as to what the resolutions were. The established industry gave concrete recommendations to the Bill and the black-owned companies had to do the same. They encouraged dialogue with National Treasury, the Financial Services Board as well as the South African Reserve Bank to try and establish connections which would foster financial inclusion. 

Meeting report

Briefing by South African Insurance Association (SAIA)
Ms Viviene Pearson, CEO, SAIA, said that the organisation was very involved in designing a new prudential framework for insurers since 2010 along with National Treasury, the Financial Services Board (FSB) and the South African Reserve Bank (SARB). SAIA supported the Insurance Bill and the objectives of the Bill which sought to promote the maintenance of a fair, safe and stable insurance market. This ultimately enhanced financial soundness and oversight, increased access to insurance, strengthened regulatory requirements for governance, risk management and internal controls and align insurance with international standards.

Ms Pearson said that SAIA was involved in micro-insurance framework discussions since 2011. It was an important step to create an enabling but fair environment. The Bill was aligned with one of SAIA’s key priority areas which were inclusive and sustainable economic transformation, including financial inclusion. SAIA appealed for urgent processing of the Insurance Bill because certainty is needed to plan, adapt and implement processes. The current dual prudential reporting placed unnecessary burden on resources and added to compliance costs. Whilst SAIA supported the Insurance Bill, any major changes in the regulatory framework should be treated and executed with caution and thorough understanding of the consequences, within the holistic regulatory framework. Continued thorough, inclusive and constructive consultation was needed to finalise subordinate regulation going forward. SAIA noted its strong appreciation for the approach followed up to this point by all involved, including National Treasury, the FSB and the SARB.

Ms Pearson said that some areas which SAIA wished to raise at this point, to be addressed through future on-going consultation was:
- Further debate on some aspects related to the Reinsurance Regulatory Framework especially with regards to locally based reinsurers who do business in the rest of Africa.
- Further work and refinement needed in the evolution of solvency capital requirements in the form of the prudential regulations.
- Some aspects in the cell captive insurance environment needed attention in the subordinate regulation.
- Continued thinking and discussions regarding the possible inclusion of agriculture insurance products in Micro-insurance Framework going forward were proposed, however the Committee had to consider possible impact on Agri Insurance.

Ms Pearson said that there was currently no business class for agriculture in the list of business class provision for index insurance which would be the best for types of products to look at for small holding farmers. Whatever the outcome of these discussions, SAIA requested that continued discussion regarding including index insurance products in the agri insurance market as a business class somewhere in regulatory framework should take place going forward.

Ms Pearson said that SAIA represented the short-term insurance industry and currently had 59 members, representative of approximately 90% of the market. These members included various types of insurance, and various different business classes. The short-term insurance industry was important, as it provided a safety net for individuals and businesses, enabled financing and credit, and can change behaviour to achieve a more sustainable environment. The value of short-term insurance industry was often underestimated because it represented only R109.9 billion in premiums, with total assets of R121.9 billion, however insured property assets was worth more than R1 trillion, excluding motor vehicles and some other forms of insurable assets. SAIA believed it was critical that all South African role players should join hands to collaboratively work toward, and achieve, an inclusive and sustainable South Africa for all. The short-term insurance industry had a unique role to play as it touched many other sectors. The industry was also very closely affected by the environment, for example high accident and crime rates, climate change, socio-economic and political environment.


Ms T Tobias (ANC) asked SAIA to give its stance on branches of insurance companies which were multinational. She felt that the tax laws should be aligned to contributions that such branches made. These companies were spreading the risk through different jurisdictions and spending less. Her understanding was that if the insurance company was not registered in South Africa but operated in the country the contribution to the tax was very little. SAIA also referred to the agricultural sector and said that micro-finance did not cover agriculture. Were there specific recommendations for insurance which SAIA was proposing? She suggested that it submit specific text.

Ms Pearson replied that SAIA was referring to reinsurers only and not insurers. Reinsurers were global companies who spread their risk in different territories so that they could provide insurance cover for insurers who had a lot of losses in a specific area. They helped the insurers carry the risk and it was important that they were allowed to continue doing that.

Mr S Buthelezi (ANC) wanted to know in which ways SAIA supported financial inclusion since it mentioned it. What evidence was there that SAIA supported financial inclusion since it represented 90% of the market?

Ms Pearson replied that SAIA was involved in the creation of the micro-insurance framework through various consultations since 2011 which would create an affordable and inclusive environment for suppliers. The proportionality in the Bill allowed for entry into the market through less complex products.

Mr B Topham (DA) asked how indexation related to the agricultural sector. There were four areas which affected the barrier to entry which was commercial application, capital adequacy, technical competence and the on-going reporting obligation. Was there another element that had to be considered? Did the insurance associations have recommendations to push the agenda for transformation?

Ms Pearson said that if the agricultural aspect could not go in the Bill then it could be included in a list of products at the end of the Bill. SAIA was working on a framework which would assist small business development. Research was done in certain areas and it showed that the drought and other occurrences impacted certain farmers so if one farmer yielded less compared to others in a certain area they could be compensated for loss through a more affordable insurance product.

Ms Tobias said that the list of indexes could be included in the government guidance notes. She asked for specific text to be provided. The Bill could not discuss products as part of the legislation.

Briefing by Association for Savings and Investment South Africa (ASISA)
Ms Anna Rosenberg, Senior Policy Advisor, ASISA, said that since 2010 there was a collaborative effort with industry participants on the Solvency Asset Management (SAM) project and it was now in the final phase towards implementation. A number of changes were made to the draft Bill and these addressed most of ASISA’s comments. ASISA members supported the objectives of the Insurance Bill and supported the urgent finalisation and approval of the Bill as the insurance industry was in a state of flux for a prolonged period of time. The final alignment with the FSR Bill was needed. ASISA requested that an exemption provision be reinserted in the draft Bill for example to cater for an audit committee exemption because the Companies Act did not require for a separate audit committee if the audit committee of the company was sufficient. Approvals by the Prudential Authority (PA) and other administrative actions and approval of audit partner should include that notification to the PA should be sufficient with the PA able to intervene if necessary. The approval by the PA to conduct any other business should include criteria to be considered by the PA under section 5(4). She also said that PA may request information from a key person on termination of appointment and this should include materiality requirement under section 16(4)(a).

Ms Rosenberg said that ASISA’s members include 38 members with one or more long term insurance licence. ASISA believed that the insurance industry was a strong, resilient sector and world leader in product innovation. Priorities for the sector included increasing access so that more South Africans were adequately protected against the adverse financial impacts of becoming disabled, suffering a critical illness or death. Also, ASISA strived to significantly reduce the insurance gap and provide consumer financial literacy.


Mr F Shivambu (EFF) said that both SAIA and ASISA supported the urgent processing of the Bill. These were two representatives of the insurance establishment who benefited the most currently. They were saying quickly adopt the Bill because it suited them. Only 1% of the industry was controlled by black people who were direct owners. Were SAIA and ASISA saying the status quo should be retained? Out of R8.6 trillion, only R408 billion of assets were managed by black asset managers which were 4.6%, yet the assets belonged to black people which were black workers in majority.

Ms Pearson said that there was a list of business classes that SAIA was working with but it needed more consultation especially on further subordinate legislation. To assist with financial inclusion SAIA was advocating for micro-insurance legislation and it was involved in different processes. SAIA was still working on it but products could be made available which was appropriate and affordable. Lower barriers of entry would promote entrepreneurship.

Ms Rosenberg said that the Bill was not maintaining the status quo. The Bill introduced significant changes to the industry. The capital requirements were very different and insurers with higher risks had to hold more capital and it introduced more stringent governance and oversight requirements.

Ms Tobias said in its presentation ASISA reiterated that the notification to the PA should be sufficient. ASISA was differing with the Committee’s approach to approval. Approval had to be sought when certain decisions were taken and one of them was auditing. She wanted clarity on that point. Also, there was an assumption from ASISA that the Companies Act was the overarching Act but in this context it was not. If there were new provisions that any other legislation introduced it should be read together with the Companies Act.

Ms Rosenberg said that the appointment of the external audit firm was important but also having the PA to approve the audit partner was regulatory overkill because there were already professional standards for the auditors and it could lead to unnecessary delays because if an auditor left a firm it would have to wait until the PA approved a new auditor which could take time.

Briefing by Centre for Applied Legal Studies (CALS)

Ms Boane Twala, Lawyer, CALS, said that it was a human rights organisation and registered law clinic based at the School of Law at Wits University. CALS was committed to the protection of human rights through the empowerment of individuals and communities. CALS had five programmes and took a three pronged approach which was advocacy, research and litigation. A very important programme was the business and human rights programme which sought to ensure that corporate entities acknowledged their power to influence the treatment of human rights, respect human rights and actively protect, promote and fulfil human rights.

Ms Twala said that CALS did a lot of litigation on the provision of social grants and research indicated that insurance providers were well placed to advance human rights’ compliance by corporations and states because they provided insurance to projects that facilitated or exacerbated human rights’ abuse. Insurance providers also provided insurance products to impoverished and vulnerable members of society and had to serve the interest of those beneficiaries and not exploit their vulnerabilities. Therefore, by attaching human rights’ related conditions to the provision of insurance, insurance providers could ensure that human rights were respected, protected, promoted and fulfilled. A good illustration of the power and impact that insurance companies had was the Lion of Africa case which was heard in the Constitutional Court in 2016. The case concerned a moratorium that had been placed on the use of child support grants to meet life insurance policy obligations. Black Sash intervened as a friend of the court in that case and presented evidence from an actuary concerning the value, to children, who were beneficiaries of the child support grant, of life insurance. The actuary found that, due to the low mortality rate of children, less than 1% of premiums that were paid to the insurance provider were used to pay the claims of children who had died. She said that the case demonstrated the risk of insurance providers providing insurance for financial profit as a result of very remote need for beneficiaries.

Mr Vuyolethu Mntonintshi, Candidate Attorney, CALS, said that the Insurance Bill as it currently read fell short of advancing and protecting human rights. CALS believed that it should be amended to include principles of business and human rights and environmental, social and good governance considerations. CALS began by making submissions to the Committee concerning the non-implementation of ethical and professional standards and requested that the Committee addressed these in future. CALS wanted an amendment to the objective of the Bill which would then read as follows: “The objective of this Act is to promote the adherence to human rights and the Constitution of the Republic of South Africa and to promote the maintenance of a fair, safe and stable insurance market for the benefit and protection of policyholders, by establishing a legal framework for insurers and insurance groups that— (d) promote compliance with the Bill of Rights as provided for in the Constitution, in the application of insurance law;CALS recommended that the precedent set by the Pension Fund Regulations be followed in the Insurance Bill by amending section 4 as follows: “An insurer and a controlling company must, at all times— (e) conduct its business in compliance with the principle of long term sustainability bearing in mind environmental, social and governance factors; and (f) deal with the Prudential Authority in an open and cooperative way.”

Mr Mntonintshi said that CALS, therefore, called on the Finance Committee to heed this trend and amend the Insurance Bill to explicitly provide that insurance providers should respect, protect, promote and fulfil human rights and comply with the Constitution. The Finance Committee could also do so by replicating the language of Regulation 28 and the Companies Act. In conclusion, CALS viewed the Insurance Bill as the prime opportunity for the Committee to follow the trend that was emerging domestically and internationally to ensure that human rights and the Constitution, the supreme law of the country, were complied with.


Ms Tobias asked CALS which regulation it was referring to as section 28. She suggested that CALS put the relationship between human rights and the Companies Act in specific wording.

Ms Twala replied that she was referring to the Pension Fund Regulation which was Regulation 28. Both the Companies Act and Regulation 28 highlighted the centrality of human rights considerations even though these were legislation that regulated business.

Dr M Khoza (ANC) said that there were all these policies which sought financial inclusion but the legislative process forgot about priorities. She wanted to know if CALS looked at the license conditions in the Bill and whether it encouraged inclusion for those who were previously excluded especially from the supply side of insurance.

Mr Buthelezi wanted to know how often CALS consulted with National Treasury when looking at this Bill.

Ms Twala said that CALS had consulted with NT before and they were difficult to access and unforthcoming but engagements were limited.

Mr P Mabe (ANC) said that he struggled to understand the issue of human rights in insurance. He wanted to know which section of the Bill was transgressing human rights. The Committee had to ensure that the law was in sync with the Constitution.

The Chairperson said that CALS was present in the hearings on the Financial Sector Regulation “Twin Peaks” Bill and submitted some amendments which were included in that Bill. He agreed with their view but the question was what could be done in a Bill. Provisions had to be tightened. He urged CALS to look at the Bill again and make more concrete suggestions especially with regards to the implementation of human rights issues. He wanted to know from CALS what the Committee could do more than what it was already doing. The Committee programme was full and he urged them to contact him directly. The persistent theme was de-racialization and transformation and Treasury had to do more and far bigger. He also felt that people who were appearing on behalf of the insurance industry were not representative of the demographics.

Ms Twala said she welcomed the invitation and she would submit more specific amendments and wording.

The Chairperson asked National Treasury to meet with CALS within 14 days to discuss the Bill. He felt that National Treasury talked too much to business and not enough to NGO’s and civil society.

Briefing by Black Business Council (BBC)
Mr George Sebulela, Secretary-General, Black Business Council (BBC), said that it supported the objectives of the Bill which aimed to protect the policyholders and facilitated monitoring and preserving safety and soundness of insurer, increasing access to insurance. However, it was worrying as it did not look to accommodate transformation of sector as envisaged in BBBEE. Costs were huge at small entities and the costs of reviewing agreements and external auditing costs were impacting small business. The majority of auditors were white which was also worrying. BBC looked at the commission structures and this would be reduced by brokers and the adequacy to make profit was minimal. BBC believed that the Bill was based on European law and did not focus on the market in South Africa. Small black business might be taken over by bigger companies. Capital adequacy became a barrier to black SMME’s and therefore BBC required transformation and the status quo has to be taken away.

Briefing by Popcru Group of Companies (PGC)
Mr Zwi Mdletshe, CEO, PGC, said that his submission was being presented jointly by the four black-owned insurance companies in South Africa which regrettably, after 22 years of freedom, had a joint market share of no more than 1%. If this bill were to be signed today in its current form, the little market share of black insurance companies would shrink to zero taken back by default to the pre-1994 economic ownership framework. The resultant situation was that, based on the 22 years’ experience, black insurance companies would be excluded from macro-insurance and be relegated to micro-insurance. PGC believed that the South African insurance industry was well advanced and it was praised the world over for its stability and was resilient during the 2008 financial crisis; its main fundamental problem was its lack of transformation. Mr Mdletshe said that the presentation should not be misconstrued for being anti-regulation, and whilst PGC had serious reservations about the SAM regime, particularly for small, black insurance companies, it believed that, if Parliament agreed this industry had to be transformed, PGC would automatically revisit those aspects of SAM that have a propensity of being barriers to transformation.

Mr Mdletshe said that PGC submitted that the Insurance Bill was unconstitutional to the extent that it failed to incorporate express transformation objectives. Without such incorporation, the Insurance Bill could not pass constitutional muster if challenged on constitutional grounds at a later stage. Without such incorporation Parliament would fail in its constitutional obligation to respect, protect, promote and fulfil the rights in the Bill of Rights. Further, any steps taken by Parliament to pass this Insurance Bill in its current form would be ineffective and unreasonable and render the Insurance Bill unconstitutional. The Preamble of the Promotion of Equality and Prevention of Unfair Discrimination Act 4 of 2000 stated that: “The consolidation of democracy in our country requires the eradication of social and economic inequalities, especially those that are systematic in nature, which were generated in our history by colonialism, apartheid and patriarchy, and which brought pain and suffering to the great majority of our people.” Although significant progress was made in restructuring and transforming society and its institutions, systemic inequalities and unfair discrimination remained deeply embedded in social structures, practices and attitudes, undermining the aspirations of our constitutional democracy.

Mr Mdletshe said that the Bill sought to sterilise resources, focusing on imaginary instead of real risk. The intent of the Bill was to tighten compliance to prevent a once in a 200 years event, resulting in the sterilization of resources that should be used to grow the economy of the country today. The conversation instead should be about how insurance and retirement fund assets should be used to prevent an impending crisis that will be brought by increasing levels of unemployment. The Bill would increase systemic risk as it sought to promote only big players. Systemic risk was not solved by pushing small players out of the industry as the Bill sought to push small insurance companies which were mostly black out of the mainstream in to micro insurance. Insurance and Retirement Fund Prudential would always take second place to Banking Prudential under the Reserve Bank.

Mr Mdletshe said that the private ownership of the Reserve Bank and its independence meant that where the people have entrusted Parliament with responsibilities over their savings in insurance and retirement fund. Parliament has outsourced those responsibilities to a party they have no control over. The Banking Industry in South Africa was the best in the world, but it did not mean that South Africans had the best banking services in the world. The Reserve Bank regulated without due regard to consumers so why should it be given power of consumer savings created out of its domain. The Reserve Bank was hostile to black banks, except for VBS bank, and all homeland banks some of which were acquired by black operators, were regulated into extinction.

He highlighted that the Bill should instead open up Financial Services. Parliament had an opportunity to break down this interwoven, carefully crafted and well executed exclusion strategy of black people in the financial services sector by taking bold decisions. PGC submitted that, the current practice that insurance companies in South Africa were compelled to use Banks, Auditing Firms and Actuarial firms that have been ring-fenced was not assisting the transformation agenda. The secrecy around which service providers were to be used and what criteria informed their preference was an affront to this Parliament because, this was not legislated, but it was standard practice. With the banking and the auditing sectors being controlled by a few white people, this practice further haemorrhages any attempt to transform the financial services. Instead, the Bill should be in an unambiguous and crystal clear language championing the use by insurance companies of emerging Actuarial firms, Auditing Firms and other banks.

Mr Mdletshe said that the fact that, in a period of 22 years, the market share of black-owned insurance companies has not been able to pass the 1% mark indicated that, at this pace, blacks would be occupying a 3% of less of the market share by 2094, when we celebrate the centenary of the democratic breakthrough. This was an unsustainable trajectory that may have disastrous social and economic consequences for South Africa in the long term. This was not only a betrayal to this generation but also to future generations. The current appalling statistics about transformation in the insurance industry were a reminder to all of us about the constitutionally enshrined principles of transformation that seem to have been forgotten over the past 22 years. He said that if this bill was signed without giving effect to transformation objectives, besides the fact that it would shrink the ownership of black insurances companies to zero, it would be a monumental betrayal to the thousands of our martyrs who died for freedom.

Mr Vusi Sithole, CEO, Nestlife, emphasised that black insurance owners were not anti-legislation but rather wanted to protect emerging black insurers. He felt that certain sections of the Bill would wipe out small black insurers and it went against the Constitution. He also felt that there were certain parts of the Bill which were already being implemented in a parallel process without anyone knowing or noticing it. This Bill had to be taken back otherwise this Bill would reverse any transformation objectives reached thus far.

Mr Khandani Msiti, Board Chairman, Union Life, said that the financial industry had a bearing on all other industries in the country. The “investment strike” that the country was facing was not by the international manufacturing sector but only by the international financial industry. The imaginary risks to the country were causing resources to be sterilized to a point where it was detrimental to the insurance companies. Also, the smaller companies were placed under greater pressure with regards to capital requirements because the FSB did not know them and therefore they required more.

Mr Treasure Mabunda, Executive Head: Risk, Bophelo Life, said that the licensing process was so long that the FSB only approved one short term insurance company license for the previous year. It took forever to get an insurance license.

Briefing by Mr G Cilliers

Mr Gerhard Cilliers presented his case. He said that he lodged a petition to change the Insurance Bill. Legislation should be there to protect the public and allowing financial institutions to market own occupation income protector products without a choice for whole life left a professional person financially destitute if the individual can not commence his or her own occupation due to medical constraints after the policy term had seized. He asked for a clause to be created to make it mandatory for own occupation disability benefit cover to include a whole life option for current and new policies and to make this retroactive for previous policies at the option of affected policy holders. If policy holders exercised the option they had, the insured must make a lump sum payment to cover the difference between term premiums paid and whole life premiums they would have paid if the policyholder were given the option instead of having a term option only.

Mr Cilliers reported that Old Mutual sold him a term option policy and changes were made to the policy in September 2012 to include a whole life option which he was then not eligible for. Insurance companies should adhere to fair and just practice. Without a whole life option for own occupation disability income protector this was not the case. He said that he received a qualification from UNISA as a Computer Systems Analyst in 1986. This was the work he continued to do for many years until migraines and mini-strokes put an end to his career. He did not have any other qualification or work experience. He bought the Old Mutual Green Light income protector in 2003 and the product was marketed by an Old Mutual Financial Advisor with the choice of five or 10 years period. According to the marketer these were periods where a claim could be lodged against the policy. He chose the 10 year period. His neurologist then forced him to resign his own occupation as a computer system analyst in 2003 at Assentia Consulting. In March 2003 his neurologist commented the following where a claim was lodged against the policy “It is therefore my recommendation that Mr Cilliers should be declared medically unfit to commence with any computer work, seeing that this is really to the detriment of his health.” This was as a result of over exposure in front of the computer where he spent all his time in front of a computer with recurring migraine attacks. His MRI scan from 10 February 2003 showed mini strokes due to over exposure on computers which forced him to restrain from computers. A successful claim was lodged against the policy in 2003. In March 2015 Old Mutual informed him that his monthly income would cease because it reached the end of the 10 year cover date. It then came to light that the policy he bought was a term policy and not a whole life policy. Correspondence with Old Mutual also revealed that the policy he bought in 2002 did not have a whole life option choice. It was changed in 2012 to have whole life choice.

Mr Cilliers said that given the fact that he could not continue with his own occupation, this policy left him and his dependents financially destitute. He therefore requested that the policy he bought in 2002 to be declared unlawful given the fact that Old Mutual sold him a term policy with devious marketing but without an option of whole life. Legislation should also change and be backdated for all own occupation policies to have a whole life choice. To be in this situation at age 59 without an income and no prospect to return to his own occupation where he made provision to protect his income with an own occupation disability policy, was unfair practice and should be unlawful. The last few years were hell. He and his family were living off their capital where he sold their house in Johannesburg for a profit. The idea was to move to the Western Cape but currently they were renting a small apartment in Somerset West without any prospect to purchase property. Their capital was depleting on a monthly basis until there will be nothing left. Changing legislation would put him and his family in a better position to have at least 70% of his monthly income as it was in 2003 which would be just enough to serve their monthly needs. In June 2015 an appeal was lodged with the Ombudsman but with current legislation ruled in favour of Old Mutual on 11 November 2015.

Dr Khoza wanted PGC to clarify the market share of 1% and then on another slide it was reported as 4.6%. Did they consider it best practice to have Lloyd’s underwriters as the underwriters in the legislation in South Africa? In future it seemed as if there would never be black underwriters.

Mr Shivambu said that the diagnosis of PGC and BBC were correct in terms of the lack of transformation in the insurance and financial sector. Even the figures were correct. The 1% referred to the owners of insurance industries and the 4.6 % referred to the assets under managers which were under black asset managers. Yet all of them were tiptoeing as to what the resolutions were. Things written were not clear in terms of what they wanted the Committee to do. The established industry gave concrete recommendations. He suggested that they come back with concrete proposals. He suggested that one such proposal could perhaps be that the PRA which gave licences, at all times have 30% of licenses given to historically disadvantaged people. People had to be legislated back into financial inclusion. The social contracts by the ANC had failed dismally. The insurers had to have a certain participation of black people as a prerequisite for a licence. There were many transformative things which can be implemented. The biggest asset manager is PIC and it was run by black people so if black people were given the opportunity to lead the industry, it would not collapse. There was a need for political willingness and courage.

Mr Buthelezi said that he agreed transformation had to be legislated. There was no debate about it. He was concerned that the industry was implementing things which were not laws. He wanted to know what BBC and PGC’s experience was with National Treasury and whether there was interaction as most things they were raising had not been incorporated into the Bill. .

Mr Sebulela said that BBC had regular interaction with National Treasury. However, it was by default that BBC found out about the Insurance Bill as National Treasury did not let them know.

Mr Mabe said that he felt this was a window-dressing exercise since the black insurance companies were talking about things which were already implemented. The Committee might have to meet with the CEO’s of the big five banks and give them an opportunity to reply. He wanted to understand the cause of the problem. He was concerned that some presenters were saying that the Bill did not pass constitutional muster because it pointed to parliamentarians. There was a need for clarity with regards to what had to be done. The issue of the banking sector and auditing firms kept coming up.

Mr Topham said that transformation was a big problem internationally as well as in South Africa and it had to be fixed. He suggested that the role-players submit specific recommendations such as proposals to discount on capital adequacy and annual fees. He agreed that 1% of the insurance industry was controlled by black companies but it did not mean that 1% of insurers were owned by black companies. It was important to measure progress in the whole financial sector.  He agreed with issues on the designated auditor and actuaries and over regulation was hurting transformation since IRBA was already the regulating authority for auditors. It was also affecting smaller practices in South Africa. In South Africa there was an anomaly whereby big black auditing companies were already in the playing field but more could be done. PWC was a level 1 BBBEE firm. He said that the issue raised by Mr Cilliers seemed like a commercial concern. If it happened today then the FAIS Act would apply. However, the proposal Mr Cilliers was making would cost the industry a lot of money and therefore he felt it could not be done. 

Ms Tobias said that the case of Mr Cilliers indicated the role of insurance brokers and how they caused the insurance industry a headache. She wanted PGC and BBC to provide a list of clauses which could be challenged constitutionally. Most issues such as the time it took for licensing were regulatory issues and not legislative. When stating that the Bill was unconstitutional the presenters had to provide evidence.

The Chairperson said that it was about finding the right balance. Most things BBC and PGC raised were related to regulations and he urged them to take it forward on their own through the right platforms. He urged civil society not to say that the Bill was unconstitutional as no Bill could come through Parliament without it being constitutionally sound. They could say they disagreed with the Bill but then they also had to come with an opinion. He did not want them to equate transformation with de-racialization. He told Mr Cilliers that he agreed with Mr Topham. It would be impossible to retrospectively pass such legislation. His case already went to the Ombudsman which was the highest authority and there was not much the Committee could do for him but ensure that someone in a similar position did not experience the same thing.

Mr Shivambu said that presenters had to propose concrete changes that had to be made to legislation.

Mr Mdletshe said that PCG would come back to Parliament and propose implementation to what should be the position in the future.

Ms Rosenberg said that ASISA would work with BBC and PGC as all members were treated equally. It always expressed the minority view and put it forward in submissions. Workers Life was a member of ASISA and it would be helpful to understand the issues of what was happening.

Ms Pearson said that it was not only 1% of the insurance industry which was black-owned but rather around 23% of short-term insurance which was black-owned. There were strict targets set in terms of the insurance sector. It would come with figures at a next opportunity.

The Chairperson said that a meeting would be set for 14 March which would allow for the beginning of a new phase. The Committee might have more hearings and everyone had to make concrete submissions.

Mr Jonathan Dixon, Deputy Executive Officer, FSB, said that transformation was a priority. Consultation was possible but how far could it go? There was a total of 7 years of consultation done on the Bill and he agreed that more could be done for it to take place. The FSB was truly behind transformation and de-racialisation. Some things were limited by the regulatory framework but should not be changed at the expense of the policyholder.

The Chairperson said that the protection of the policyholder should not become the excuse for a lack of transformation. He urged all stakeholders to meet with one another and with National Treasury to bridge the gap. Ultimately it would be Parliament who decided.

The meeting was adjourned.


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