Medical schemes regulator slams the Treasury over bill
Draft Conduct of Financial Institutions Bill removes its core functions, council says, claiming it was not consulted over move
The medical schemes regulator has criticised the Treasury for failing to consult it on the draft Conduct of Financial Institutions Bill, saying it will render it a lame duck if passed in its current form.
The bill is part of the government’s reforms to strengthen governance of the financial services industry, following the promulgation of the Financial Sector Regulation Act in 2017, which established the Prudential Authority and the Financial Sector Conduct Authority (FSCA).
The bill outlines what consumers and industry players can expect of financial institutions, including medical schemes and administrators.
Its proposals thus affect the role of the Council for Medical Schemes (CMS), which oversees 80 medical schemes that provide health cover to 8.9-million people.
The bill was published by the Treasury in December 2018, and interested parties had until April 1 to comment.
Its explanatory note reads that the FSCA’s full powers will apply to medical schemes, but initially this role will continue to be played by the CMS, with the concurrence of the FSCA.
“The FSCA and the CMS are working together to reach agreement regarding when FSCA concurrence with CMS decisions is required during this transition period, as well as more broadly on how approaches to conduct of business and consumer protection issues in the medical schemes environment can be harmonised.
Medical schemes will therefore not be required to be licensed under the bill framework during this transitional period, “although this may be reviewed over time”, it said. The transitional period ends on March 31 2021.
But in its submission to the Treasury, the CMS said it was not consulted on the bill. Although it was part of a task team dealing with the Financial Sector Regulation Act, the contents of the bill were not discussed at their meetings, it said.
In a strongly worded statement, the CMS said it is irritated and disappointed with the bill, because it removes its core functions.
The CMS’s mandate includes protecting members’ interests, overseeing product design, investigating complaints, settling disputes and advising the health minister on matters affecting the industry, said CMS registrar Sipho Kabane.
“Removing these core regulatory functions from the CMS and placing them with the FSCA is tantamount to legislating the CMS out of existence as an independent regulator,” Kabane said.
“If additional statutory or even voluntary dispute resolution mechanisms are created it will create further problems for members of medical schemes who are already overwhelmed by the complexities and asymmetry of information in the health insurance sector,” he said.
The CMS said medical schemes do not operate like institutions providing insurance products and should not be subjected to the same conduct requirements.
“The specific regulatory functions that include product design, disclosures and claims management in medical schemes should fully reside under the CMS in line with the powers accorded to it by the Medical Schemes Act,” it said.
“The CMS demands that the Treasury and FSCA properly consult with the CMS before the final version of the [bill] is sent to parliament,” Kabane said.
The Treasury had not responded to Business Day’s request for comment at the time of publication.