Report by the Ombudsman
Our Annual Reports serve a number of important functions, including a recordal of the history of the offices. This purpose of the Annual Report stands out for 2020, which was the year of the “soft” amalgamation between the two offices and of the COVID-19 pandemic.
We refer to the “soft” amalgamation to indicate that there was not a complete merger of the offices into a single ombudsman scheme for the insurance industry. The principal reason why a unification of the offices did not take place is the absence of the regulatory mechanism to bring about such a merger. It is not necessary to explain this at any length. Suffice it to say that the Financial Services Ombudsman Schemes Council ceased to function some time ago.
Chapter 14 of the Financial Sector Regulation Act, 9 of 2017, finally came into operation on 1 November 2020. This chapter deals with the financial services ombudsman schemes, including the two offices. We are awaiting the outcome of the “Financial Ombud System Diagnostic” (the “Ombudsman’s Diagnostic”) which is a long-expected initiative of the National Treasury, funded by the World Bank Group. It started during the year when extensive questionnaires were submitted to the various Ombudsman offices. Two eminent international experts on ombudsman schemes were retained for the Ombudsman’s Diagnostic by the World Bank Group. They are Mr D Thomas of the United Kingdom and Mr S Tregillis of Australia. Our offices had a cordial working relationship with the two experts and the representatives of the World Bank Group during the entire investigative process, which stretched over a period of many months and which required considerable effort and input from us. It is anticipated that the final report on the Ombudsman’s Diagnostic will be released during 2021. It will be more appropriate to deal with the developments which follow the release of the relevant report in next year’s Annual Report.
Now that Chapter 14 has come into operation, the offices have a period of up to 18 months to apply for recognition in terms of section 194 of Act 9 of 2017.
Towards the end of 2019 the two offices concluded a Shared Services Agreement (“the Agreement”) of which clause 2 sets out its purpose:
“2.1 Following the promulgation of the Financial Sector Regulation Act, 2017 (‘the FSR Act’), and the repeal of the Financial Services Ombud Schemes Act, 2004 (‘the FSOS Act’), the OSTI and the OLTI wish to establish a joint industry ombudsman scheme, as contemplated in Chapter 14 of the FSR Act, to be known as the Office of the Insurance Ombudsman.
2.2 The Office of the Insurance Ombudsman, as a joint industry ombudsman scheme, is to be achieved by the establishment of a body corporate in the form of a new voluntary association under which the single Insurance Ombudsman will be appointed. The OLTI and the OSTI will, pending the coming into operation of Chapter 14 of the FSR Act, continue to operate as two separate entities under the umbrella of a single Insurance Ombudsman.
2.3 On the basis that the new voluntary association cannot be formally established until the commencement of Chapter 14 of the FSR Act, this Agreement is concluded in order to begin to provide the framework in terms of which the new voluntary association, to be established, will function.
2.4 The Parties record that acting in terms of this Agreement will provide a valuable opportunity for both the OLTI and the OSTI, as well as consumers and insurers, to learn from the shared services experience for the better implementation of the eventual new voluntary association to be established in terms of Chapter 14 of the FSR Act.”
Clause 8 of the Agreement provides for the publication of this “Combined Annual Report”.
During the year under review another related development took place, namely a project which was undertaken by the four voluntary financial services ombudsman schemes (the two offices, the Ombudsman for Banking Services and the Credit Ombud). The purpose of the project is to explore the possible amalgamation of these offices in a single ombudsman scheme. Extensive work has been done in connection with the project, which enjoys the support of the National Treasury and the Financial Sector Conduct Authority. At present our mandates are limited to participation in the exploratory discussions and our governing bodies are kept informed of all important developments on an ongoing basis. It is impossible to predict the future course of events, in which the Ombud Council could play a significant role.
In terms of the Agreement, I was appointed as the Ombudsman to both offices, with effect from 1 January 2020. On that date Ms E Teixeira-Mckinon became the Chief Executive Officer of the Ombudsman for Short-term Insurance.
This is an appropriate opportunity to record my sincere appreciation of and thanks for the following:
In consultation with them it was decided that the Deputy Ombudsman at each office will contribute to this publication, also by way of a Report which will concentrate on the operational aspects of the offices, and that I will deal herein with the regulation of the financial sector.
On 29 September 2020 the second draft of the Conduct of Financial Institutions (“COFI”) Bill was published by the National Treasury for public comment, after it had received close to 800 pages of comments on the first draft published in December 2018. In its accompanying media statement the National Treasury said:
“The COFI Bill is a key pillar in government’s Twin Peaks financial sector regulatory reform process that aims to entrench better financial customer outcomes in the South African financial sector. It is a financial institution-facing law that sets requirements for financial institutions to meet and outcomes to deliver.
The Bill aims to significantly streamline the legal landscape for conduct regulation in the financial services sector, and to give legislative effect to the market conduct policy approach, including implementation of the Treating Customers Fairly (TCF) principles. These principles are currently not enforceable, and while customer outcomes may have somewhat improved, this has not been consistent across the sector. The COFI Bill will ensure that the TCF principles are legally binding and enforced on all financial institutions.”
During the year under review we experienced the devastating consequences of the COVID-19 pandemic on our society as a whole. This Annual Report pays tribute to the staff at the offices for the role which they played during the pandemic. Without their commitment, dedication and sheer guts we would not have survived the havoc caused by that disaster. I salute all of you in the words of A A Milne:
“You’re braver than you believe, and stronger than you seem, and smarter than you think.”