The following article has just appeared in Risk SA. Maybe not so welcome news for binder holders. The commentary from the FSB as quoted here certainly does not rule out the setting of actual maximums per task undertaken. Watch this space.
The AC Team
[divider]Risk SA, Dominic Uys
South Africa’s Financial Services Board (FSB) has announced that it will issue benchmark guidelines regarding binder fees for short-term insurance brokers in May. The initial deadline of April no longer stands, and RISKSA has learned that the FSB will present its decision at the Retail Distribution Review (RDR) in May.
Caroline Da Silva, FSB deputy executive officer for the Financial Advisory and Intermediary Services Act (FIAS), comments that heightened control is required in the intermediated environment where brokers act on behalf of their clients, but are remunerated by the insurance companies whose products they sell. This becomes complicated in situations where independent brokers have binder arrangements with insurance companies.
“Firstly, we should be making sure that these structures are properly disclosed to customers. At the same time we feel that there is a need for brokers to be appropriately rewarded according to the function that they perform,” Da Silva says.
A number of proposals have so far been put on the table, including the possible capping of broker fees, which has elicited some negative responses from the broker market.
“No-one would object to improved market conduct that treats customers fairly. The need is to get the balance right between avoiding over-regulation that stifles growth, creativity and job creation on the one hand and a total free-for- all on the other,” comments Patrick Bracher, director at Norton Rose Fulbright. RISKSA will be exploring the issue in-depth in the May edition of its monthly magazine.
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