Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)Industry ChartersFinancial Services CharterCode Series FS800: Measurement of the Access to Financial Services Element of Broad-Based Black Economic EmpowermentStatement 802: The Measurement of the Access to Financial Services Element of Broad-Based Black Empowerment as it relates to the Long-Term Assurers3. Products and Product standards |
Life Products
| • | Life Products appropriate for identified needs - The Life Products considered are those that address the identified priorities of death and serious illness. In the access market these risks are often insured through funeral schemes and credit life cover. Other forms of product are however possible. |
| • | A set of minimum standards for Life Products is retained, akin to the UK CAT standard approach, (CAT= fair Charges, easy Access, decent Terms). This will ensure that appropriate products are available to those requiring risk mitigation tools to address identified priorities. |
| • | A process needs to be in place to enable the update of these standards from time to time and allow for the creation of new standards. |
| • | Simplicity of documentation - A simple summary of key policy terms will be provided in various languages that will enable a broad understanding of the product. |
| • | Transactional access - The opportunity to purchase the product, pay the premiums due, make amendments to the policy, and to lodge a claim and receive payment of the claim. |
Integrated products
| • | New standards are created for the retirement 'gap' market products. |
| • | An integrated consumer focused approach that requires collaboration between banking, short term insurance, long term insurance and CIS is investigated, based on consumer needs. |
Target market
The target market for Life products will be based on income and pegged at the tax threshold for individuals and double the tax threshold for families. The target market definition is to be adjusted annually, based on changes to tax threshold. The tax threshold currently stands at just under R60,000 per annum.
Measurement
The key measurement of success for the provision of "effective access" is the penetration level (usage) of appropriate products within the above target market. Targets for transactional access and penetration will be measured by in-force / on books business at measurement date.
Appropriate Products – Each product that meets the required standards will be "FS Code compliant".
Transactional Access – Measured entities will score points for the proportion of the standard map (covering the adult population based on the recent AFRGIS banking densification study) in which they are able to demonstrate transactional access.
Scoring
Points are scored by measured entities as follows:
| • | 3 points will be allocated to Appropriate Products. Each compliant product made available by a company will score 1 /N x 3 points, where N is the total number of products for which standards have been developed. Companies will also have to demonstrate that each qualifying product represents at least 5% of new business access volumes. |
| • | 7 points will be allocated to Market Penetration. The targets will be phased in over the period 2011 - 2017. The target will be based on an appropriate market share measure as a proportion of the overall industry target below. |
| • | 2 points will be allocated to transactional access. |
| • | A company will score 2 points for Consumer Education spending of 0.4% of post-tax operating profits and proportionately for anything less. |
Based on the above, the maximum score will be 14 points.
Key Dependencies
| • | Harmonisation of Access product definitions to FAIS regulatory exam requirements - it is critical that FS Code definitions for access products are aligned to the various regulatory exam exemptions that may be made available by the FSB to intermediaries distributing access products. |
| • | Clarity of Government's intentions to provide savings alternatives at national level to this market. |
| • | Product and measurement standards including max cover limits, etc, require updating in the form of guidance notes. This will occur after gazetting. |
Target Life Products
The target penetration will be 5,739,023 policies issued to the target market based on a formula to be contained in a guidance note issued by the Sector Council post gazetting.