Insurance Law reform on the cards
Clients of insurance providers commonly believe that they have no remedy when their claim is rejected. Most members of the public are aware that various Ombudsman Services exist where complaints can be raised, however few realise that an insurance law attorney can assist with advice and legal action. Legal services are becoming more accessible to clients and this is backed by the promising changes in law to clarify and extend consumers rights which are being investigated.
Eight years ago, regulators introduced the Treating Customers Fairly (“TCF”) principles, hoping that insurers would make their documents and products much simpler and that it would cut consumers’ complaints to a fraction of what they used to be. The shift gained momentum during 2020 when policyholders took on insurance giants to enforce their rights’ on business interruption insurance, and gained momentum when the Supreme Court of Appeal came down against insurers.
What proposals are there for reform of the law, regulation or rules relating to the provision of insurance services?
The latest version of the Conduct of Financial Information Bill (or COFI) was published for comment in September 2020. If passed into law in its current form, it will render TCF principles legally binding and enforceable. The Bill aims to provide for the conduct of all financial institutions, including insurers. In relation to insurance, the Bill will repeal the Short-term and Long-term Insurance Acts and replace them with an entirely new regulatory framework.
The insurance specific content will be contained in Conduct Standards. The authorities hope to introduce the Bill into law during 2022 but there is a great deal of work to be done to incorporate standards relating to various categories of financial services into law which may delay implementation.
In addition, the authorities are continuing to implement the Retail Distribution Review (RDR), which proposes a number of changes to the law, largely relating to intermediary services such as insurance intermediaries (including, for example, financial adviser categorisation and remuneration, premium collection services and remuneration for the low-income market).
COFI will hold managers personally accountable for consumers’ losses
Another thing that the COFI Bill will change is governance in these institutions to protect consumers more from the financial devastation that they suffered when companies like VBS Mutual Bank and the Insure Group collapsed. It is reported that up to R1.7 billion remains unrecovered to date.
Insure Group was a company that used to collect premiums on behalf of insurers and broker. But instead of passing on those premiums, the group held onto them for 45 days. Then, during that period, invest the money in risky and cash-hungry assets without the insurers’ knowledge. The insurance companies took all the risk for the premiums collected to cover the customers whose money the Insure Group had swindled.
Premium collection and add-on insurance policies
The COFI Bill would change the laws around outsourcing premium collection and the governance of outsourcing contracts in general to extend accountability to clients.
Another important change concerns insurance sold at motor dealers. In 2020, the FSCA published an information request relating to add-on insurance policies sold at points of sale at dealerships or as part of vehicle financing arrangements. This is the result of large scale rejections of claims and complaints by consumers.
Policyholders and clients of insurance companies are encouraged to exercise their rights and seek legal advice in situations where they feel wronged.
Need advice on your insurance matter?
If you need assistance with an insurance matter, where a claim has been denied, rejected or repudiated feel free to contact us at Paul du Plessis Attorneys on 012 809 1588 or send an e-mail to paul@pauldup.co.za
Sources:
“A new law may force financial institutions to change how they treat their customers” Londiwe Buthelezi 6 May 2021 Fin24.
Market Conduct in the insurance industry