CMS critical of Medical Schemes Brokers

It is somewhat worrisome that the financial services industry, and intermediaries in particular, are coming under so much fire lately. Especially when the majority of brokers add value and provide an important service to members of the public.

And then we have a regulatory authority, like the Council for Medical Schemes, publicly criticising brokers, and in my opinion, generalising that brokers are not offering valuable services.

The monthly commission payable to medical schemes brokers is a paltry R60 per member, and has not been increased to cater for inflation this year. However their expenses such as compliance and licencing costs increase every year. Fair? I think not.

FINANCIAL INTERMEDIARIES ASSOCIATION OF SOUTHERN AFRICA

MEDIA STATEMENT

Thursday, 3 September 2009: Comments by the Registrar of the Council for Medical Schemes (CMS), Patrick Matshidze, about the conduct of healthcare intermediaries have drawn strong criticism from the Financial Intermediaries Association of Southern Africa (FIA) and intermediary community.

At yesterday’s launch of the CMS’ latest annual report, Matshidze stated that there is “particular concern about the presence of unscrupulous medical aid brokers who render non-value services.”

Says Linza van Aswegen, chairperson of the FIA’s Healthcare Benefits Committee: “While this may hold true for the minority of healthcare intermediaries, this is not the case for the majority of financial advisors in the industry who work hard to add value and offer a meaningful service to thousands of consumers. It is unfair to make such a generalisation and one which could mislead members of the public to believe that all intermediaries are under suspicion of poor conduct.”

The value that the healthcare intermediary adds to medical scheme members and prospective members should not be underestimated says van Aswegen.

“Medical schemes are fraught with technical terminology, complex terms, limits and different benefits, a wide range of codes that are allocated to various medical procedures and many other components which only a specialist in this area will be able to interpret and explain properly,” she says.

The FIA also wishes to clarify Matshidze’s reference to high broker or intermediary commissions.

For several years now, commission has been regulated by the Minister of Health and is limited to R60,70 plus VAT per member per month or 3% of the monthly contributions to the scheme plus VAT. The maximum amount per member has not yet been adjusted for inflation in 2009 (an increase is allowed for in legislation).

With regard to the prevailing misperception that intermediaries churn policies in order to bolster their commission, the public should be made aware of the fact that in instances where a medical scheme member transfers from one scheme to another, the commission due to the intermediary from the original scheme ceases to be paid altogether and payment is then picked up by the new scheme. “The intermediary does not benefit financially by moving a member from one scheme to another,” says van Aswegen.

Intermediaries are subject to a code of conduct outlined under the Financial Advisory and Intermediary Services Act, while healthcare intermediaries are also regulated by requirements set out by the CMS. In addition, all members of the FIA are bound by a strict code of ethics.

“FIA intermediaries are committed to assisting the consumer to make informed decisions regarding medical schemes and health insurance products,” says van Aswegen.

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