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ANDRE JACOBS ANDRE JACOBS

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ANDRE JACOBS ANDRE JACOBS Powered By Docstoc
					   ANDRE JACOBS
            AON

The Value Concept – where are
      we going wrong?
            The problem
We seem to be doing something wrong
• BHF - “churn is expensive to schemes”
          conflicted
• CMS – “conflicted relationships between
  administrators, scheme and brokers”
• Consumer organisations – websites to
  assist members select a scheme/option
          BHF comments
• Churn is expensive – pay brokers while
             b     ff t l
  new members affect solvency
          p      g
• Cost of printing cards and other
  materials
• New members do not bring past
  contributions
• Administrators benefit from new
  members
          BHF comments
• Members loose out – waiting periods
• Scheme they have left looses out
                        cost,
• Brokers only added to cost no addition
  of new members to schemes
              Churning
Broker services
• Provision of service or advice -
  introduction or admission of members to
  a medical scheme
  Ongoing provision of service or advice –
• O     i       i i    f     i       d i
  access to, or in respect of benefits or
  services offered by the scheme
              Churning
Remuneration
• Lesser of 3% or R60.70 (plus VAT)

Why move a member or group of
 members for no reason if no up-front
 remuneration?
             CMS comments
• Brokers influence cost of schemes directly
  and indirectly
   – Directly – fees paid
   – Indirectly – quality of advice
• Schemes and administrators attempt to
  influence – bidding up commissions
• Legislation changed but still loopholes
  allowing conflicts of interest (permitting
  schemes to pay fees for advice)
          CMS comments
• Conflicts reduce quality of advice and
       it h        to     id being h ll
  permit schemes t avoid b i wholly
  responsive to members and
  b    fi i i
  beneficiaries
                       g
• Direct costs not a significant cost driver
• Impact on scheme choice can
  dramatically impact on how schemes
  compete
         CMS comments
• On the whole, brokers do not at present
           b        their li t
  see members as th i clients as
  schemes pay the commissions
• Administrators try to supplement
  commissions to influence behavior

Contracting arrangements seem to be an
 issue
   Contracting arrangements
• Prior written agreement with the scheme
  Letter f       i t  t        b         l
• L tt of appointment – member or employer

Administrator or scheme is clearly not our client
  – lose focus on the member and they will
  terminate your services and payment ceases.
  t    i t            i       d         t
  Absolutely no point in “protecting” a scheme
  or administrator as you will not have any
  clients (member appointments).
   Quality and independence of
              advice
• Educated and experienced advisors
    Medical Schemes A t
  – M di l S h      Act
  – FAIS Act
• FAIS Act procedures to be followed
• “conditions or restrictions imposed by the
           supplier
  product supplier”
• Remuneration
  Conflicts
• C fli
• Compliance
     Where is the problem?
Difficult to understand as far as brokers
  are concerned  d
• No incentive to churn members
• Members are very definitely our clients
  – they decide whether we get paid or
  not
• Quality of advice – FAIS Act and basic
  business principles
Scheme / administrator behavior

• Their actions cannot be controlled by
  brokers
• Brokers can however control their
  reaction
  –R      i focused on th core objectives
    Remain f        d    the       bj ti
  – Adhere to the FAIS Act in terms of giving
    advice for the correct reasons
Where we go wrong

				
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