Transparency and oversight of broker incentive practices in South African insurance law

Abstract

This research investigated the crucial concerns regarding broker remuneration practices, focusing on the transparency and oversight mechanisms governing these practices in the South African insurance sector. The central function of brokers in the relationship between consumers and insurers positions them to espouse consumer trust and actuate market efficiency. Despite this, the intricate nature of insurance products and services and the potential conflicts of interest attributable to wide-ranging compensation schemes and loopholes for exploitation have spurred concern from stakeholders in the insurance industry. The research contextualises broker remuneration schemes within the broader financial system and illuminates the various methods of compensation and incentivisation. The study investigated the main themes and challenges inherent to broker remuneration, such as a discord of interests and the ramifications for market integrity. An empirical analysis of data on remuneration structures is conducted using qualitative research methods, incorporating a literature review, theoretical framework, and a conceptual framework approach. The research findings expose anomalies in transparency, consistency, and legality of remuneration structures, undermining consumer confidence in the market. Variations in regulatory oversight are identified, and the discrepancies that could lead to unethical conduct and market abuse are highlighted. In conclusion, this research proposes a framework for enhancing regulatory oversight of remuneration methods for brokers. It also advocates for uniform disclosure requirements, innovative regulatory compliance strategies, and the assumption of best practices across the insurance sector.