The Financial Sector Conduct Authority (FSCA) has launched a probe into Edgars’ decision to force its insurance cover holders to switch their payment method to monthly debit orders.
DURBAN - The Financial Sector Conduct Authority (FSCA) has launched a probe into Edgars’ decision to force its insurance cover holders to switch their payment method to monthly debit orders.
The FSCA said that while there was no legislation that prevented an insurer from changing the manner in which it collected premiums, the process needed to be inclusive. FSCA divisional executive for business supervision Kedibone Dikokwe said the authority had been in contact with Hollard Insurance on the policies linked to Edcon clients.
She said the FSCA had put the process under its spotlight to protect the insurance policyholder.
“Our office is still engaging with the insurer on this last issue and we are still obtaining further information to assess the reasons for this decision and the effect of this decision on policyholders.”
The Competition Tribunal this month approved the sale of parts of Edgars to Durban’s Retailability, subject to certain employmentrelated conditions.
The sale included the transfer of approximately 120 stores in South Africa together with the businesses conducted in them. This week Edgars told its customers that the switch was due to the sale of parts of the retailer’s former parent company, Edcon, which went into business rescue in April.
The retailer said the sale included Edcon’s credit business. It offered a new premium and no waiting period for the switch. Dikokwe said collection of premiums should not result in a situation where policyholders were not able to obtain cover under a policy because of the manner in which premium was collected.
She said the FSCA had been involved in the debacle to ensure that the method in which a premium was collected would not result in a policyholder being disadvantaged. “We would, however, like to state that we are not sure whether this is the case in this situation, as we have not obtained enough information from the insurer in this matter,” said Dikokwe.
The FSCA said that Edcon’s footprint stretched across Africa and in South Africa, RCS was the credit provider and there were agreements in place which allowed for insurance premiums to be paid to the insurer by RCS, which collected both the insurance premium and payment in terms of the credit agreement. Dikokwe said different payment options were available to clients of Edcon for purposes of payments to be made. She said that in considering whether fair outcomes were achieved for policyholders, the FSCA would consider the notice period provided.
“In South Africa, depending on the types of agreements in place, there might also be a responsibility on an insurer to inform the regulator of the cancellation of the specific agreement and also to inform the policyholders within 30 days of the cancellation of the agreement.
“Notice to the policyholders would then include notice about changes to the premium collection,” Dikokwe said. Retailability chief executive, Norman Drieselmann, said a deal had been reached between RCS, Hollard and that Edgars’ new home intended to ensure the collection of premiums via the Edgars Account card. He said IUA would be assisting with customer service as they migrated from the Edcon infrastructure to their own.
“Furthermore, the insurance business has always been underwritten by Hollard, and this will continue to be the case. This is why we’re able to ensure continuity of the insurance product,” he said.
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