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CHANGES TO THE INSURANCE LANDSCAPE UNDER THE NEW INSURANCE ACT OF 2017

On 17 January 2018, the President of the Republic of South Africa signed the Insurance Bill into law. The change to the insurance legislation has come into effect on 1 July 2018 and brings about a range of changes. The aim of the amendment to insurance legislation is to provide more South Africans with the opportunity to cover themselves and their assets, and provide for greater protection for policyholders.

The Insurance Act 18 of 2017 (hereinafter to referred to as “the Act”), provides a consolidated legal framework for prudential supervision of the insurance sector that is consistent with the Constitution of the Republic of South Africa, 1996 and international standards for insurance regulations and supervision. The Act introduces a legal framework for micro-insurance to promote financial inclusion. As a result, the Act promotes the maintenance of a fair, safe and stable insurance market. The Act seeks to repeal all prudential requirements and consolidates substantial parts of the Long-Term Insurance Act 52 of 1998 and Short-Term Insurance Act 53 of 1998. The amendments brought about by the Act introduces micro-insurance products, traditional funeral plans that are more accessible, affordable and fair for consumers.

Practically, the Act brings about the following changes:

  • The Act will bring into effect the National Treasury’s Micro-Insurance Policy Document, which specify a micro-insurance standard;
  • The New Insurance Act provides for regulatory and supervisory frameworks which will make it easier for low-income earners to access quality insurance products;
  • Caps under micro-insurance policies are limited to R100,000.00 for life insurance and R300,000.00 for non-life insurance;
  • To ensure that policies are easy to understand, micro-insurance policies and funeral policies may only provide risk benefits with no surrender value or investment elements; and
  • Waiting periods are restricted to a quarter of the contract term for death or disability due to natural causes; no waiting periods are allowed for policies covering accidental death or disability; no waiting periods are allowed for credit risk policies; no waiting period may be imposed when a policyholder cancels a policy with one insurer in favour of a policy providing similar cover with another insurer.

The Act seeks to provides redress for consumers insofar as they will now have a range of micro-insurance products to select from. The Act sets a foundation for South African Insurance Industry and it is a step forward for all South Africans.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)