The Registrar of Short-Term Insurance referred a matter against Santam Limited to the Enforcement Committee of the FSB

The referral relates to the following contraventions:

1.  Directive 156.A.i. (ST) read with Section 4(2) of the Short-Term Insurance Act, No 53 of 1998 (“Act”) in that Santam failed to comply with an instruction contained in the Directive.

2.  Section 45 of the Act read with regulations 4.1 and 4.2 of the Act, in that Santam, during the period November 2008 to 31 March 2013, authorised a number of collecting agencies to collect premiums in relation to short-term policies on its behalf, without authorising the agencies in writing and without obtaining securities from them as prescribed in regulations 4.1 and 4.2 of the Act.

3.  Utilising a method to calculate its unearned premium provision for its crop insurance class which is not in accordance with the prescribed method in the Act, without the approval of the Registrar.

The Registrar took into account the mitigating factors which included:

1. Santam fully co-operated with the Registrar’s investigation and the enforcement action;
2. Santam rectified the contravention of Section 45;
3. No policyholders suffered any losses or damage as a result of the contravention;
4. The contravention relating to the calculation of the crop insurance class UPP had no positive effect on the financial position of Santam or the insurance industry as the impact of the methodology followed by Santam to calculate the crop UPP reserve did not result in its UPP being less than it would have been had the prescribed calculation method been applied;
5. The impact of the methodology followed by Santam to calculate the crop UPP reserve is not expected to have an impact on the solvency position of Santam;
6. Santam’s 2012 application to utilise a different method to calculate its unearned crop UPP has been approved by the Registrar.

Consequently, the Registrar agreed to a penalty of R200 000, which penalty was imposed by the Enforcement Committee on Santam on 1 July 2013.