By: Old Mutual
A Group Risk Insurer’s perspective
On 1 January 2018, legislative changes to the Policyholder Protection Rules (PPRs) came into effect which requires Group Risk Insurers to play a more engaging role. These regulatory changes, along with the additional responsibility they call for, appear to have gone under the radar for employee benefits consultants.
Lumondt Kritzinger, Head of Old Mutual Group Assurance, says that the concept of fair treatment lies at the heart of the outcome that the legislator intends to achieve with these amendments, with the new PPRs being closely aligned to the Treating Customers Fairly (TCF) outcome-based framework. “The fairness provisions described in the new PPRs extend to policyholders as well as to individual employees and retirement fund members, and require Group Risk Insurers to be able to demonstrate that all stakeholders are treated fairly at all times.
“This renewed focus is to be welcomed, as employees or retirement fund members are often not that familiar with the detail surrounding the risk benefits they are or could be entitled to.”
From a Group Risk Insurer’s perspective, Kritzinger says the most impactful changes relate to data requirements, direct member communication and policy terminations. Given the staggered implementation of the various PPRs, he believes it is important to start this work right away to ensure all the provisions of the PPR are complied with timeously.
The new legislation makes the insurer’s responsibility clear, he says. “Even though there may be reliance on a third party (such as an intermediary or employer) to perform any function required by the PPRs, the rules spell out that it is the insurer that is ultimately responsible for ensuring that the provisions are met.”
This, he says, places a heightened onus on Group Risk Insurers to monitor the execution and compliance of the various provisions of the PPRs. “Although this could be quite onerous, we do believe it will be advantageous and foster closer working relationships between Group Risk Insurers, intermediaries/consultants and the employers or retirement funds they are advising/consulting to. There is no doubt that a more holistic partnership approach will help to ensure that the objectives of the legislation are met.”
Pivotal to the amendments is the new requirement for all policyholders to provide very specific data to the Group Risk Insurer, says Kritzinger. “The new PPRs require insurers to have a Data Management Framework in place. The data needs to include, at the very least, the names, identity number and contact details of every employee or member.
“Furthermore, the PPRs emphasise that every attempt should be made to ensure direct communication with employees and members to facilitate fair treatment. This communication requirement is in addition to the insurer’s obligations to keep the policyholder informed – it does not replace it.”
On the topic of premium reviews, Kritzinger says the new PPRs make provision for regular reviews in accordance with the terms of the policy, with a focus on the frequency as well as the reason for the reviews. “The ‘fairness’ principles are extended to cover this important area of managing Group Risk arrangements. What is particularly noteworthy, given the current cycle of increasing risk rates (particular in Insurer’s Income Disability portfolios), is Rule 15.4 (a), which states that ‘any review of a premium payable under a policy must reasonably balance the interests of the insurer and the reasonable benefit expectations of policyholders or members’”.
Kritzinger believes that this will encourage Group Risk pricing to be managed in a way that promotes fair and sustainable pricing – from everyone’s perspective.
He points out that Group Risk arrangements are not “for life” and Rule 20 of the PPRs governs the termination of policies, and differentiates between individual policies and Group Schemes policies. In addition, this rule differentiates between policy terminations instituted by the insurer and those initiated by the policyholder.
“Where the insurer intends to terminate the policy, 31 days’ written notice must be given to the policyholder and the Registrar of Long-Term Insurance, whereas if the policyholder terminates or intends to terminate a group scheme policy, the sitting insurer needs to notify the Registrar of Long-Term Insurance as soon as reasonably possible of the termination/intended termination.”
Although many employees and retirement fund members have traditionally been quite far removed from their Group Risk benefits (other than when they have a need to claim), the legislator’s intention, says Kritzinger, is to keep the individual member or employee informed along the way – even when insurers change.
Kritzinger concludes that the heightened onus on Group Risk Insurers to ensure fair treatment of all individual members of Group Risk arrangements will come at a cost as it entails changes to processes, forms and systems. “These changes need to be recognized and implemented in collaboration with all stakeholders to ensure they are efficient and cost effective, and due regard must be given to the respective roles of all stakeholders.”