Rule 19 puts a 14-day paper loop between two insurers whenever a risk policy is replaced. What counts as a replacement, and what the record has to show.
Two situations put a South African brokerage inside rule 19 of the Policyholder Protection Rules. In the first, you are the adviser moving a client's risk cover from one insurer to another. In the second, somebody else is moving your client, and a copy of their paperwork lands on the desk of the insurer whose policy is being replaced. Both matter for persistency, and the rule is built so that neither happens silently.
Rule 19 sits in the chapter of the Policyholder Protection Rules (Long-term Insurance) dealing with unreasonable post-sale barriers, and it works by forcing a documented handshake between the replacing insurer, the intermediary and the insurer of the replaced policy. It runs on a 14-day clock. Below is what it actually says, and what it means for a book of individual risk business.
Rule 19.1 defines replacement in terms of individual risk policies. It is the action or process of substituting an individual risk policy — the replaced policy — wholly or in part with another individual risk policy, or the termination or variation of one individual risk policy and the entering into or variation of another, where this is done to meet the same or similar needs or objectives of the policyholder. Crucially, the definition applies irrespective of the sequence in which those transactions occur.
The word doing the heavy lifting is "variation". In relation to the replaced policy, a variation includes:
In relation to the replacement policy, a variation means any change that results, or will result, in an increase to the premium. Put those together and the practical consequence is clear: trimming the cover on an old policy while writing a new one for the same need is a replacement, even though nothing was cancelled and nobody used the word. So is letting a policy go static while placing fresh cover elsewhere. Advisers who think of replacement as "cancel and rewrite" routinely underestimate how often they are inside the rule.
Rule 19.2 sets out the sequence, and every step has a named owner:
| Sub-rule | Who acts | What must happen |
|---|---|---|
| 19.2.1 | Replacing insurer | Before entering into an individual risk policy on which an intermediary rendered services, obtain confirmation from that intermediary whether the policy would constitute a replacement |
| 19.2.2 | Replacing insurer | If it is a replacement, obtain a copy of the record of advice the intermediary must provide under section 9(1)(d) of the FAIS General Code — the replacement advice record — unless the intermediary confirms no advice was given |
| 19.2.3 | Replacing insurer | No later than 14 days after receiving that record, provide the insurer of the replaced policy with a copy |
| 19.2.4 | Managing executive of the replacing insurer, or a delegate of appropriate seniority | No later than 14 days after receipt, confirm in writing that the record complies with the disclosure requirements in section 8(1)(d) of the General Code and contains sufficient information about both policies to indicate the intermediary took reasonable steps to satisfy themselves that the replacement is more suitable than retaining or modifying the replaced policy |
| 19.2.5 | Replacing insurer | If it emerges that the intermediary failed to disclose a replacement after being asked, report the non-disclosure to the Authority; and where this is established within six months of the policy being entered into, inform the policyholder they may cancel under rule 4 within 31 days of being notified |
| 19.2.6 | The Authority | May determine the format of a replacement advice record or other notification required by the rule |
Note what 19.2.4 asks of the insurer: not whether the advice was good, but whether the record demonstrates that the comparison was done. A record that lists the new product's features without setting the old one alongside it fails that test, and the business bounces back to the adviser — usually at the worst moment in the pipeline.
The substance comes from the FAIS General Code of Conduct, not from the PPRs. Section 8(1)(d) requires that, where a product is to replace another, the provider fully discloses the actual and potential financial implications, costs and consequences of the replacement, including where applicable full details of: fees and charges on the replacement compared with the terminated product; special terms and conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided, compared between the two; for an insurance product, the impact of age and health changes on the premium payable; differences in tax implications; material differences in investment risk; penalties or unrecovered expenses deductible or payable on termination; how readily realisable the replacement is compared with the terminated product; vested rights, minimum guaranteed benefits or other guarantees that will be lost; and any commission, fee or brokerage received on both the terminated and the replacement product where the provider rendered services on both.
Two neighbouring obligations are easy to miss. Section 8(1)(e) requires the provider to take reasonable steps to establish whether the product identified is wholly or partly a replacement — you cannot wait for the client to volunteer it. And section 8(3) requires an adviser recommending replacement of an existing long-term contract to notify the issuers of both the existing and the replacement policy at the earliest practicable opportunity, and in any event no later than the date any transaction requirement is submitted to a product supplier. Section 9(1)(d) then requires the record of advice to contain the comparison itself and the reasons the replacement was considered more suitable than retaining or modifying the terminated product. That is what makes the general duties in our guide to the FAIS record of advice concrete in a replacement case: the same file, with a comparison and a reason attached to it.
The defensive side of rule 19 is the part brokerages rarely plan for. Because 19.2.3 sends the replacement advice record to the insurer of the replaced policy, a churn attempt on your book generates a document trail before the cancellation lands. Many insurers run a retention process off that notification and contact the servicing broker. If yours does not, ask what triggers exist and how quickly you would hear about them.
When the call comes, the useful questions are the ones section 8(1)(d) already frames. Has the client been shown the waiting periods that restart? The loadings that follow age and health changes since inception? The guarantees or vested benefits that fall away? A replacement can be entirely correct — needs change, and better contracts exist — but a comparison that has been done properly is easy to talk about, and one that has not is not. Where the client was never told the policy was a replacement and this is established within six months, rule 19.2.5 gives them a 31-day window to cancel the replacement under rule 4. Set against that, the cost of an early lapse on your own side is the subject of our note on commission clawback in the first twelve months.
The comparison is adviser work, and no system produces it for you. What a system can do is make sure the conversation around it is retrievable. Replacement discussions are exactly the ones that happen informally: a client forwards a competitor's quote on WhatsApp, an adviser answers with a voice note, and three months later the file contains a signed record of advice with nothing behind it.
Brokerages running WhatsApp on a firm-owned number through a shared inbox keep those threads attached to the client record, attributable to a named representative and exportable to CSV for the compliance file, rather than sitting on a phone that leaves with the adviser. In ORIS, the client's risk score and engagement score make the pattern visible earlier — a client who suddenly goes quiet after years of steady contact is often already in someone else's pipeline — and the inbox holds the thread that explains what was said. It does not draft the replacement advice record, and it should not: that is a comparison a person signs. For the licensing frame behind all of this, see the FAIS glossary entry, and more on holding on to a book sits in our retention topic hub.
Rule 19 as described here sits in the Policyholder Protection Rules made under the Long-term Insurance Act and is framed around individual risk policies. The FAIS General Code of Conduct, by contrast, applies across financial products: section 8(1)(d) governs replacement disclosure for any financial product, and section 8(1)(e) requires you to establish whether a product is a replacement at all. So the disclosure and record-of-advice duties travel with you into short-term business even where the insurer-to-insurer notification loop in rule 19 does not.
They are the same document doing extra work. Section 9(1)(d) of the General Code requires a record of advice, and where the recommended product is a replacement it must additionally contain the comparison of fees, charges, special terms and conditions, exclusions, waiting periods, loadings, penalties, excesses and restrictions between the two products, plus the reasons the replacement was considered more suitable than retaining or modifying the terminated one. Industry shorthand calls that version the replacement advice record, and rule 19.2.2 is what makes the insurer ask for it.
Rule 19.2.5 requires the replacing insurer, once it establishes the non-disclosure, to report it to the Authority. If the non-disclosure is established within six months of the insurer entering into the replacement policy, the insurer must also inform the policyholder that they may cancel the replacement policy in accordance with rule 4 within 31 days of being notified. For the brokerage that means a regulatory report, a policy that may unwind, and the commission consequences that follow an early cancellation.
It can be. The definition in rule 19.1 treats a reduction or removal of a benefit, a reduction in premium, making a policy paid-up, the cessation of premiums, a partial surrender, or the policy becoming static because an update option was not exercised as a variation of the replaced policy. If that variation is paired with entering into or increasing another individual risk policy to meet the same or similar need, it is a replacement regardless of the order in which the two happened. Test the intention, not the paperwork.
Two 14-day periods run from receipt of the replacement advice record. Under rule 19.2.3 the replacing insurer must provide the insurer of the replaced policy with a copy no later than 14 days after receiving it. Under rule 19.2.4 a managing executive of the replacing insurer, or a person of appropriate seniority to whom that responsibility has been delegated, must confirm in writing within the same 14 days that the record meets the section 8(1)(d) disclosure requirements and contains sufficient information about both policies.
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