Moonstone Investment Indicators 7 January 2019
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Investment Indicators - 7 January 2019

We wish all our readers a Happy New Year and all the best for 2019!
In This Week's Newsletter
Rates Review
Investment Rates
Money Market Funds
Top 3 Rates
   
From the Crow's Nest
ASISA stats on fraudulent claims - Spike in dishonest death claims
   
Your Practice Made Perfect
PFA guidance notice no. 8 of 2018 – How to apply the default regulations by retirement funds
Financial Planner of the Year shares tips - Behavioural science leads to better returns
   
Regulatory Examinations
Reminder: The impact of FAIS Notice 86 on regulatory exams
Schedule for 2019
UK exam date : Friday, 15 March 2019
   
Careers Platform
Are you hiring? Moonstone offers biggest industry platform for employers
   
In Lighter Wyn
New Year’s resolutions
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Rates Review
Top 3 rates
 1. Secured Investment Rates
Please note that (G) indicates a Guaranteed and (L) a Linked product. In order to understand the difference between guaranteed and linked rates, kindly click here for an explanation.
 R 100 000
 
 
 
     
  Company This Week Last Week
1 1Life (L) 6.890% 7.210%
2 Absa (L) 6.848% 7.181%
3 Clientéle Life (L) 6.720% 6.950%
     
 R 1 000 000
     
     
  Company This Week Last Week
1 1Life (L) 6.940% 7.260%
2 Assupol (G) 6.890% 7.220%
3 Absa (L) 6.848% 7.181%
     
 2. Money Market Funds
  Company This Week Last Week
1 Coronation 7.850% 7.740%
2 Allan Gray 7.840% 7.810%
3 Cadiz 7.780% 7.670%
Please bear in mind that our figures, though based on the actual quotations that you also use, are for information purposes only, and can never replace the official quotation from the product house. In terms of the guarantees, you are requested to clarify the exact extent of such guarantees with the product house prior to advising clients.
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From the Crow's Nest
From the Crow's Nest
ASISA statistics on fraudulent claims - Spike in dishonest death claims
Although there was a decline in the number of irregular claims the value of the fraudulent and dishonest claims was almost the same as in 2016. South African life insurers foiled a total of 5 026 irregular claims to the value of R1.13 billion in 2017. In 2016, 13 488 claims (mostly funeral claims) worth R1.03 billion, proved to be irregular. These statistics were released by the Association for Savings and Investment South Africa (ASISA) in December 2018.

According to Donovan Herman, convenor of the ASISA Claims Standing Committee, life insurers are under constant pressure to adapt their detection methods as fraud attempts become more sophisticated due to fast evolving technology. This in the midst of frequently being accused of trying to find ways of getting out of paying claims. The “Momentum debacle”, as it became known in the media, is an example of the initial reluctance to pay a claim, where the deceased was killed in a hijacking, on the grounds of non-disclosure of a medical condition unrelated to the cause of death. Click here to read our recent article.

The figures actually show that during 2017 South African life insurers made benefit payments of R469 billion to policyholders and beneficiaries. Of this amount, more than R60 billion was paid to individuals who had experienced either death or disability in their family circle. This is an increase of almost R5 billion from 2016.

“If we left fraud and dishonesty to spiral out of control, honest policyholders would end up footing the bill through higher premiums driven by untenable claims rates”, Herman stated.

Death claims

A total of 2 111 death claims worth R564.2 million was declined in 2017 due to fraud and dishonesty compared to 444 death claims worth R275.2 million in 2016.

In the majority of death claims (1 784) rejected in 2017, insurers detected that fraudulent documentation had been submitted. A further 316 claims were declined due to misrepresentation and/or material non-disclosure.

Misrepresentation occurs when a policyholder deliberately provides misleading information to a life insurer, while material non-disclosure refers to the failure of policyholders to disclose important information about a medical condition or lifestyle.

Since the person applying for insurance knows more about the risk to be insured than the insurer, the law compels applicants to honestly disclose all information likely to influence the judgment of the insurer when determining appropriate policy terms and premiums. Information generally regarded as material includes medical history, state of health, family history, and life style.

Funeral claims

A total of 1 025 funeral claims worth R34.9 million was rejected in 2017, mainly due to misrepresentation and material non-disclosure, as well as fraud. In 2016, there were 11 302 irregular funeral claims worth R168.3 million.

Life insurers have reported a number of cases where funeral cover was taken out on the lives of people under the pretence that they were family members of the policyholder, when in fact they were colleagues, fellow church members or even fictional people.

There is of course also an “informal” funeral cover sector whose statistics are not included in the Asisa statistics and, judging by remarks from the regulatory authorities, is a major challenge - editor.

Disability claims

Claims worth R516.5 million were declined in 2017. Of the 775 claims not paid, 757 were rejected due to misrepresentation or material non-disclosure. In 2016, some 621 claims worth R578.8 million were rejected.

“Since disability claims tend to increase when the economy is under strain, we are not surprised that dishonest claims also increased significantly”, Herman said.

He further mentioned that policyholders are often tempted to not disclose existing health conditions with the aim of securing lower premiums.

Hospital cash plans

Strict measures introduced by life insurers a couple of years ago to curb the abuse of hospital cash plans continued to pay off as fraudulent and dishonest claims against hospital cash plans showed a further decline in 2017. A total of 989 claims worth R6.1 million was declined compared to 2016 when 1 047 claims worth R8.5 million were rejected.

According to Herman, the simplicity of these products leaves them wide open to abuse. As a result life insurers had to implement tough measures to ensure the financial viability of these products.

Retrenchment benefit claims

Dishonest and fraudulent retrenchment claims increased from 74 in 2016 to 126 in 2017. Life insurers declined 113 claims due to misrepresentation and non-disclosure and 13 due to fraud.

The total value of these claims amounted to R3.6 million in 2017, compared to R2 million in 2016.

Click here to download the ASISA media release.
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Your Practice Made Perfect
Your Practice
PFA guidance notice no. 8 of 2018 – How to apply the default regulations by retirement funds
As a result of several enquiries on the application of the Default Regulations by retirement funds, the FSCA recently released a guidance notice.

Background

The Minister of Finance issued the Default Regulations with effect from 1 September 2017. The Default Regulations prescribe conditions for default investment portfolios, default preservation and portability, and annuity strategies for funds. All new default arrangements that came into operation on or after 1 September 2017 must comply with the requirements set out in the Default Regulations. Existing default arrangements must be fully aligned to the Default Regulations by 1 March 2019 and the Authority will examine funds' compliance with the Default Regulations from 1 March 2019.

Click here to download the Guidance Notice.

A recent Personal Finance article also reported on the matter. According to Katherine Barker, Head of FundsAtWork at Momentum Corporate, South African retirement fund members are overwhelmed by countless options. She welcomes the implementation of the new retirement fund default regulations set for 1 March 2019, when retirement funds will be required to ensure that members receive benefit counselling to provide information and assist them in making appropriate decisions to enhance their retirement outcomes.

“Retirement benefit counselling can be instrumental in delivering better outcomes”, says Barker.

Click here to read the Personal Finance article.
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Financial Planner of the Year shares tips - Behavioural science leads to better returns
In a recent Business Report article, Janet Hugo Financial Planner of the Year, shares how behavioural finance can be used in an efficient and practical manner in the wealth-management process.

According to Hugo one of the easiest ways to incorporate investor psychology into financial planning is to apply goal-based investing, which involves creating specific goals with defined time horizons and selecting investments with the correct asset allocation for each goal. She shares that it works very well for pre-retirement clients who are accumulating wealth, as well as for post-retirement clients who need income from their capital.

She also uses behavioural finance in the wealth-management process to create an awareness of emotional biases that affect investment decisions.

Scenario playing is another excellent way to include behavioural finance in the financial planning process.

Click here to read the article.
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Regulatory Examinations
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REMINDER - The impact of FAIS Notice on regulatory exams

Regulatory changes have a huge impact on the content of the Regulatory Exams. The latest FSCA FAIS Notice that comes into effect on 1 February 2019 is no exception.

Candidates need to take careful note of the following:

Candidate 1:

“I am writing my RE1 or RE5 exam on or before 31 January 2019”.

The Preparation Guide, Version 14 (Released on 1 December 2018) is valid for examinations written up to 31 January 2019.

Candidate 2:

“I am writing my RE1 or RE5 exam on or after 1 February 2019”.

The RE 1 and RE 5 Preparation Guide (inclusive of FSCA FAIS NOTICE 86 of 2018) is applicable for Examinations written as from 1 February 2019 onwards as it includes the revised supervision requirements.

In the last newsletter we also shared a series of seven articles on how best to prepare for the regulatory exams. This will further guide you through your exam preparation process.

Click here to download all 7 articles.

Click here to download The Preparation Guide, Version 14 (Released on 1 December 2018) if you are writing before 1 February 2019.

Click here to download RE 1 and RE 5 Preparation Guide (inclusive of FSCA FAIS NOTICE 86 of 2018 if you are writing after 1 February 2019.

Our registration call centre is available weekdays during business hours (08h00 – 16h00). Contact 021 883 8000 / 888 9796 or e-mail faisexam@moonstoneinfo.co.za.

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Schedule for 2019

Please note
: Registration cut-off is 11 working days before date of exam.
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Careers Platform
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In Lighter Wyn
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New Year's resolutions


New Year Resolutions 1

 

New Year Resolutions 2

 

New Year Resolutions 3


New Year Resolutions 4
 

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