BUSINESS NEWS
Life insurers to pay out over R2.6bn
Posted Tue, 13 Dec 2005
South African life insurers are to refund policyholders at least R2.6-billion following a number of rulings by the pension funds adjudicator and an agreement negotiated with the National Treasury on Monday.
Metropolitan Holdings said its share of the refund, to be paid
for by its shareholders, was between R150-million and R165-million.
It is anticipated that there may be an additional administrative
cost of up to R7.5-million relating to the implementation of these
proposals.
Pension funds adjudicator Vuyani Ngalwana has since last year
struck down the high surrender fees and other costs imposed on
policyholders, often without their prior knowledge, for the early
cancellation of life policies and retirement annuities, calling
them "inflated".
"This brings an end to months of speculation and uncertainty
amongst stakeholders with regards to how the industry was going to
react to increased pressure on its lack of disclosure of costs
relating to
retirement annuity and endowment products and penalties
incurred when clients choose to terminate their policies or reduced
their monthly premiums," Metropolitan said.
Said Metropolitan chief executive, Peter Doyle: "As a member of
the Life Offices' Association (LOA), I am extremely pleased that
the different parties have come to an agreement on this matter in
the interests of all stakeholders. The long-term insurance industry
in SA remains the biggest mobiliser of personal savings and the
uncertainty caused during the past year has not been in the
interest of anyone."
Sanlam group chief executive Johan van Zyl said the deal would
cost his shareholders R600-million before tax, but would return
certainty to the industry.
Van Zyl added that Sanlam has been hard at work the past year
improving its products and policy cost structures in order to
better accommodate the needs of its clients.
LOA chairperson Mike Jackson said the R2.6-billion would
flush out
retirement payouts made to clients since January 2001.
"Essentially we are going back to 2001 and retrospectively
enhancing the value of annuities and endowments," he added.
"We consider this agreement to be a great step forward. We are
of the view that it provides a measure of restorative justice, a
bulwark against systemic risk, sufficient incentive to ensure
people remain policyholders, and simultaneously will encourage
savings in the future," the National Treasury said in its response
to the settlement reached earlier on Monday.
Sapa
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