Long Term Insurance Act, 1998 (Act No. 52 of 1998)RulesPolicyholder Protection Rules (Long-term Insurance), 2017Chapter 7 : No Unreasonable Post-sale BarriersRule 19 : Replacement of policies |
19.1 In this rule—
"individual risk policy" means a risk policy that is an individual policy;
"replacement" means the action or process of—
| (a) | substituting an individual risk policy (the "replaced policy"), wholly or in part, with another individual risk policy (the "replacement policy"); |
| (b) | the termination or variation of an individual risk policy (the "replaced policy") and the entering into or variation of another individual risk policy (the "replacement policy"); |
with the purpose of meeting the same or similar needs or objectives of the policyholder or in anticipation of, or as a consequence of, effecting the substitution or variation, irrespective of the sequence of the occurrence of the transactions;
"termination of an individual risk policy" means the termination of the policy by the policyholder, including the full surrender of the policy or cancellation of the policy from inception;
"variation of an individual risk policy"—
(a) in relation to the replaced policy, includes—
| (i) | a reduction in the premium payable; |
| (ii) | making the policy paid-up; |
| (iii) | the cessation of premiums; |
| (iv) | the application of the policy value as premiums payable in respect of the relevant policy referred to in rule 15A.3; |
[Paragraph (a) substituted by rule 10(d) of Notice No. 997, GG 41928, dated 28 September 2018]
| (v) | the reduction or removal of any benefit in respect of the policy; |
| (vi) | the policy becoming static because an option to update cover or premiums has not been exercised; and |
| (vii) | the partial surrender of the policy; |
| (b) | in relation to the replacement policy, means any change to the policy that results or will result in an increase to the premium. |
19.2 Replacement of individual risk policies
| 19.2.1 | An insurer must, before entering into an individual risk policy in respect of which an intermediary rendered services as intermediary, obtain confirmation from that intermediary as to whether or not the policy to be entered into would constitute a replacement policy. |
| 19.2.2 | If an intermediary confirms that a policy to be entered into by the insurer would constitute a replacement policy, the insurer must obtain a copy of the record of advice that the intermediary is required to provide to the policyholder in accordance with section 9(1)(d) of the FAIS General Code of Conduct (the replacement advice record), unless the intermediary confirms that they did not provide advice. |
| 19.2.3 | An insurer must no later than 14 days after receiving the replacement advice record, provide the insurer of the replaced policy with a copy of the replacement advice record. |
| 19.2.4 | A senior manager of the replacing insurer or a person of appropriate seniority to whom the senior manager has delegated the responsibility must no later than 14 days after receipt of the replacement advice record referred to in rule 19.2.2 confirm, in writing, that— |
| (a) | the replacement advice record complies with the disclosure requirements contained in section 8(1)(d) of the General Code; and |
| (b) | the replacement advice record contains sufficient information regarding the replacement policy and the replaced policy to indicate that the intermediary took reasonable steps to satisfy himself or herself that the replacement policy is more suitable to the policyholder's needs than retaining or modifying the replaced policy. |
| 19.2.5 | If at any time the replacing insurer establishes that an intermediary failed to disclose to the insurer that a policy is a replacement policy after the insurer requested the intermediary to provide such confirmation in accordance with rule 19.2.1, the insurer must— |
| (a) | report such non-disclosure to the Authority; and |
| (b) | if the non-disclosure is established within a period of 6 months from the date on which the insurer entered into the replacement policy, inform the policyholder that the policyholder may cancel the replacement policy in accordance with rule 4 within a period of 31 days from the date on which the policyholder is so notified. |
| 19.2.6 | The Authority may determine the format for a replacement advice record or other notification required by this rule. |