Insurance Law: Introduction
The insurance sector in South Africa is governed mostly by statutory law through various acts promulgated by parliament.
The industry is also specifically regulated by the Financial Services Board in terms of the legislation and regulations promulgated by parliament.
How does this affect the vehicle owner and which are the most important aspects in Car Insurance Law that the consumer needs to know? Two acts are briefly discussed here.
Short-term Insurance Act 53 of 1998
The Short-term Insurance Act 53 of 1998 (amongst other things):
– Provides for the registration of short-term insurers.
– Control the activities and administration of short-term insurers and intermediaries.
– Prescribes financial requirements, solvency and liquidity.
– Regulates policies and business practices and offers policy holder protection.
– Regulates commissions, premium collection and claims handling.
Financial Advisory and Intermediary Services Act 37 of 2002
Generally called the FAIS Act. In essence, the FAIS Act deals with:
-Regulating brokers as intermediaries and advisors, and includes various other professions
-The role of the Ombudsman is explained and formulated.
-General Code of conduct for authorised financial services providers (FSP’s).
-Determination of Fit and Proper Requirements.
It is illegal for anyone who has not applied to the Financial Services Board to be licensed as a financial service provider, to give a consumer financial advice or sell a financial product. This law protects the consumer from inappropriate financial advice, and consumers can take action if they are given bad advice.
In terms of this law, anyone or any institution selling a financial product or giving financial advice for a fee or commission must, in all their dealings, meet certain minimum requirements; behave honorably, professionally and with due diligence; provide appropriate advice; and are subject to disciplinary procedures if they do not adhere to the FAIS Act.
A financial service provider (FSP) or an FSP representative must always provide financial services honestly and fairly and with due skill, care and diligence. The service must be in the customers’ interests, and uphold the integrity of the financial services industry.
If a consumer receives inappropriate advice or if a financial service provider (FSP) or FSP representative has not followed the proper procedures, the consumer is entitled to complain to the Ombud for Financial Service Providers. A determination by the Ombud is legally binding.