Insurance industry should prepare now for Consumer Protection Act

With the operational provisions of the Consumer Protection Act due to take effect in October, the insurance industry should be taking the opportunity to redraft their agreements. The impact will be significant, according to Amelia Costa, an associate at the Johannesburg-based lawyers, Deneys Reitz. In evaluating the provisions of the CPA, it is necessary to take notice of the malpractices it seeks to address, she added. It is aimed at establishing a uniform national benchmark for improved standards of consumer protection – and at promoting historically disadvantaged market participants’ rights. “In the meantime,” said Costa, “suppliers – such as insurers – have an opportunity to offer the required insurance to the suppliers of goods and services.” She summarised the more important insurance services affected by the CPA. • A policy would be interpreted in favour of the consumer and, in the event of ambiguity, allow for more than one reasonable interpretation. “This reflects the existing law,” Costa added, “but is now an unalterable right.” • Any exclusion within the insurance contract would be measured against whether a reasonable person in the position of the consumer would have expected such exclusion – taking into account the contract’s contents, the manner in which it was presented and the circumstances around concluding it. “Policy exclusions,” Costa said, “may have to be drawn to the consumer’s attention.” • Insurers will not be allowed to take advantage of the fact that the consumer is unable to understand the terms of the contract – a result of either physical or mental disability, illiteracy, ignorance or inability to understand the language of the contract. • Terms of the policy may be ruled as unfair, unjust or unreasonable if they are excessively onesided, contain terms so adverse to the insured as to be inequitable, or if the consumer was misled by the insurance company. • The terms of the contract must be in writing and in plain language. • Exclusions may still be utilised. But the exclusions need to be in writing and in plain language, conspicuously presented to the insured, and allowing him a full opportunity to understand their terms. Insurers will eventually have to align their services with the CPA, Costa said. “They should begin now by reconsidering their insurance contracts, and advising the insured party to word indemnity terms and/or disclaimers so that they are in line with the provisions of the CPA. “Furthermore, in respect of the supply of goods, insurers are encouraged to make the insured party aware of the extended exposure faced in respect of goods sold and delivered. “Insurers should consider widening the net of their policy wordings on product liability (subject to higher premiums) for such extended liability exposure of their insured party while policyholders should take note of their increased exposure towards third parties and should make provision for the additional insurance they will need.”