Banking & Finance News South Africa

Consumer Act raises stakes for insurers

The insurance industry will face serious challenges next year, as new consumer protection laws dictating that insurance policies be written in plain, simple language come into force.

The Consumer Protection Act requires insurance companies to ensure policies are written in plain language, in terms that are easily understandable, and that they are not unjust or unfair.

Christelle Fourie, MD of leading executive motor insurance company MUA Insurance Acceptance, said yesterday: "Rewriting all documentation is an expensive and time-consuming process for insurers, and if an insurance company does not fully comply, then clients will have recourse to legal action if their claims are repudiated."

Could 'dumbing down' an own goal - greater costs to consumers?

The legislation says that a document is in plain language if an ordinary consumer (policyholder) with average literacy skills and minimal experience as a consumer of insurance services can be expected to understand the content, significance and import of the document.

"In addition to the time, effort and cost of drawing up reams of new paperwork, there is also now an increased risk on the part of the insurer. If they are shown to have flouted the regulation, there could potentially be cost implications, which, in the end, are likely to be passed on to the consumer," Fourie said.

The legislation says that any exclusions that limit the liability of the insurer also have to be drawn to the attention of the consumer in plain language.

Consequently, there would be no excuse for clients not being fully aware of their rights.

Implications

Fourie said that the Act not only had implications for insurance companies but also for brokers. "Many brokers have their own wording for the documentation they provide to clients. As a result, they will also be responsible for ensuring that all paperwork that they prepare for clients complies with the new legislation."

Rosalind Lake, an associate at commercial law firm Deneys Reitz, said it was unlikely that the legislation would come into effect in October as expected.

"The primary hold-up in relation to the implementation of the Consumer Protection Act is that there are many sections within the Act that require detailed regulations to give guidance to the interpretation and implementation of the Act," Lake said.

This possible delay did not mean business should delay preparations for the Act, she said.

Many companies were taking the necessary steps to bring their business practices in line with the legislation. "This is becoming increasingly apparent in the changes in trade descriptions, clearer and more understandable language used on signage and in agreements," she said.

Source: Business Day

Source: I-Net Bridge

For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.

We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.

Go to: http://www.inet.co.za
Let's do Biz