You will have seen from our February and March newsletters and for those who currently have juristic reps or potentially do business with them that the issue of licencing for juristic reps has to change by 30 May 2014. One aspect that remained unclear was the issue of premium collection in the short term sector and whether that is seen as an intermediary service in terms of FAIS or whether the Short term Act took precedence and the juristic representative could continue to collect premiums and hold the IGF.
The question was asked of the FSB as to which regulation would apply and their answer, received today, was as follows;
“Please note that to answer your query one has to read section 13(1)(c) of the FAIS Act in conjunction with section 45 of the Short-term Insurance Act and the regulations under the Short-term Insurance Act. On our reading of section 13(1)(c) of the FAIS Act, a juristic representative will not be allowed to contract directly with the insurer. The juristic representative’s principal (i.e. the FSP) will therefore have to contract with the insurer. Therefore, the insurer will have to authorise the FSP to collect premiums (for purposes of section 45 of the Short-term Insurance Act) and not the juristic representative.
Regulation 4(1)(2) (under the Short-term Insurance Act) states that a person (i.e. an independent intermediary) shall not be authorised to collect premiums unless that person has provided security (e.g. IGF). Therefore, the person that is authorised to collect premiums must provide the security. As it is the FSP and not the juristic representative that will have to be authorised to collect premiums, it will therefore have to be the FSP that provides the security (IGF).”
For those of you who either are a juristic representative collecting premium or an FSP with such a juristic representative then this response should enable you to finalise your thinking as to whether an application for a standalone licence is needed. and if you are an insurer or UMA with agencies with such entities you know who must now hold the IGF and to whom your mandate to collect premiums should be given to.
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