Business Brief

The insurance industry plays a crucial role in safeguarding individuals and businesses against unforeseen risks and uncertainties. To ensure fair practices and protect consumers, the Financial Sector Conduct Authority (FSCA) in South Africa has implemented maximum commission limits for long-term insurance policies. These limits are designed to prevent excessive commissions and ensure that customers receive fair value for the premiums they pay. More information on this can be found in the Long-Term Insurance Act, 52 of 1998, under Regulation 3.4.

The maximum commission limits vary depending on the type of long-term insurance policy. In South Africa, the Long-Term Insurance Act sets out the parameters within which insurers and intermediaries must operate. The Act also establishes the maximum commission percentages that can be paid for different insurance products, such as life policies, disability cover and retirement annuities. These limits serve as guidelines to regulate the remuneration of intermediaries and promote fair competition within the industry.

The establishment of maximum commission limits enhances transparency within the insurance industry. Insurers and intermediaries are required to disclose commission amounts to customers upfront, allowing them to make informed decisions. This transparency promotes trust and confidence in the industry and ensures that customers understand the cost structure of their insurance policies.

Maximum commission limits create a level playing field among insurance providers and intermediaries. By setting guidelines for commission structures, the FSCA ensures fair competition, preventing unscrupulous practices that may arise when commissions are unregulated. This promotes a healthy marketplace where insurers and intermediaries compete based on the quality and value of their offerings rather than excessive commission rates.

PPS pays first-year and second-year commission at the maximum allowable commission for a long-term insurance policy. The commission payable is only triggered when a new policy is issued or if an existing policy is amended in such a way that there is a premium increase. The commission on each of these scenarios is calculated on the increased portion of the premium only.

Some examples of amendments are the conversion of a premium pattern of an existing policy (age-rated to level-rated and vice versa) and the conversions from the PPS Professional Life Provider™ blended platform to the differentiated platform. PPS allows these conversions free from underwriting in cases where the cover amount remains unchanged. 

Other amendments include applications for an increase in cover amount, changes in the product’s term and changes in the waiting period. These amendments may attract underwriting, but for the purpose of commission payments, Regulation 3.4 prescribes that commission may only be calculated on the increased portion of the premium. 

At PPS, we recognise that your time and advice are valuable. To support you in servicing PPS members, we offer a unique bonus structure that pays additional percentages for your continued support. Our Premiums Under Advice structure is offered to all PPS-accredited financial advisers. Our first qualifying tier starts at 50 000 points, supporting our new PPS-accredited financial advisers, with the highest tier at 900 000, supporting our vested PPS-accredited financial advisers. Follow this link to learn more. 

By Driensie Coetzee: Technical Marketing Specialist

PPS is a licensed insurer conducting life insurance business, a licensed controlling company and an authorised FSP.