The Life Offices' Association (LOA) has noted with concern media reports over the past weekend alleging contraventions by member companies active in the consumer credit insurance market of the commission and remuneration regulations as set out in section 49 of the Long-term Insurance Act.
Gerhard Joubert, CEO of the LOA, says the life industry as a whole views these allegations in a serious light and does not condone non-compliance with the law or the LOA Code of Conduct. In particular, the LOA has already started a process of investigation into the allegations of non-compliance with the LOA Code of Conduct.
All LOA members are required to subscribe to the LOA Code of Conduct, which represents a best practice guide for members covering various aspects of long-term insurance business, including commission and remuneration regulations.
He says following a meeting earlier this week of a sub-committee of the LOA board, it was decided that the LOA would launch an urgent enquiry into the consumer credit insurance market. Former Long-term Insurance Ombudsman, Judge Peet Nienaber, has agreed to head the investigation.
"Companies active in the consumer credit insurance market have pledged their full cooperation to help identify problem areas and to help eradicate undesirable practices with a view towards better consumer protection," says Joubert.
"We have communicated our intentions to the Financial Services Board as well as National Treasury. This enquiry will run concurrently with an FSB investigation into compliance with the existing regulatory requirements."
At this stage it is envisaged that the enquiry will cover all consumer credit insurance marketing and distribution practices, including incentivisation strategies, which may drive behaviour that impacts negatively on consumer protection, and will seek to identify any gaps in the regulatory environment.
It is also envisaged that the enquiry will touch on product issues such as the product value proposition, the use of exclusions, disclosure and information provided pre and post sale. The output may include proposals regarding regulatory changes and/or self-regulatory interventions.
Other LOA initiatives aimed at protecting consumers in the credit life insurance space include the following:
* The LOA will shortly launch a consumer education initiative aimed specifically at informing consumers about what credit life cover is and what their rights are.
* As part of the second phase of the Zimele project (i.e. the standards for long-term insurance products that represent the industrys commitment to ensuring greater access to long-term insurance products to entry-level consumers), the LOA has formulated minimum product standards for products such as credit life cover, mortgage protection, life cover and disability cover. This will ensure that these products offer fair charges, easy access and decent terms. As with the Zimele funeral products, the maximum price to the consumer will be capped.
* The LOA's Credit Life Committee is currently looking at ways to address a lack of understanding and confusion regarding exclusion clauses being applied to credit life products. Solutions under consideration include a Code of Good Practice for members. In addition, exclusions may be restricted to certain specific conditions to create greater clarity for consumers.
* The Credit Life Committee is also looking for a client friendly solution to solve the problem of beneficiaries often only discovering the existence of a credit life policy after the three months in which claims have to be lodged. In addition, the LOA is looking for ways in which to address the apparent low level of awareness of existing credit insurance cover.
Joubert says it is the intention of the LOA to also involve other interested parties in the enquiry.
"The ultimate aim is to achieve more appropriate consumer protection in the consumer credit insurance market, which largely services the more vulnerable consumer, and where fair and transparent practices are thus of utmost importance."
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