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Public hearings into consumer credit insurance practices set for October

03 September 2007

A high powered panel of long- and short-term insurance experts has been appointed by the Life Offices' Association (LOA) and the South African Insurance Association (SAIA) to delve into problem areas in the consumer credit insurance market during public hearings scheduled for the middle of October.

The enquiry panel will be chaired by Judge Peet Nienaber, recently retired Ombudsman for Long-term Insurance. The other members of the panel are Desmond Smith (director of companies), Ronnie Napier (former SAIA Chairman and senior partner of law firm Webber Wentzel Bowens), Louis Wessels (former head: legal and policy at the Financial Services Board) and Moses Moeletsi (member of the Board of the Ombudsman for Short-term Insurance and a member of the Long-term Ombudsman's Council).

Observer status will be offered to nominees of National Treasury and the Financial Services Board (FSB). The observers may sit in on hearings, ask questions and make suggestions and recommendations to the panel.

Gerhard Joubert, CEO of the LOA, says the main aim of the enquiry is to identify and eradicate undesirable practices prevalent in the consumer credit insurance market impacting negatively on consumers.

The LOA announced its intention to launch an enquiry into consumer credit insurance practices during the middle of July following media reports alleging contraventions by member companies active in the consumer credit insurance market of the commission and remuneration regulations of the Long-term Insurance Act and the LOA Code of Conduct.

The LOA was joined by the SAIA, equally concerned that member companies may be contravening regulations to the detriment of consumers.

Barry Scott, CEO of the SAIA, says the SAIA expects its members to act in compliance with the law at all times and is in full support of the enquiry into consumer credit insurance practices.

"The SAIA and its members are concerned about allegations of possible transgressions of the law in the consumer credit arena as raised in the media recently, and we trust that this enquiry will get to the bottom of the matter," says Scott.

The public hearings will take place during the middle of October in Johannesburg and Cape Town and interested parties, including members of the public, are requested to make submissions and provide evidence. The hearings will be open to the public unless the panel decides that there are valid reasons to hear a submission in camera.

The panel of enquiry will be guided by the following terms of reference:
 
* Improper and inappropriate marketing and distribution practices.
* The payment of excessive commissions or other improper fees or incentives.
* The fairness of standard terms and conditions.
* The adequacy of the overall value provided to consumers.
* Pre- and post-sale disclosures and information provided to consumers.
* Promoting greater consumer understanding of credit life products, their benefits and the consumers rights.
 
Joubert says following the hearings, the panel will prepare a report on its findings and develop proposals on how best to address current short-comings to ensure greater consumer protection in this market.

"This may include identifying gaps in the regulatory environment as well as loopholes in the Codes of Conduct of the LOA and the SAIA," says Joubert.

Judge Nienaber comments that: "This is essentially an enquiry into market practices that may impact negatively on consumer protection rather than into the practices of individual companies. Should it nevertheless be deemed necessary to single out one or more companies in the report such company or companies will be afforded a reasonable opportunity of responding to what is proposed to be said about it or them in the report."

The report will be made public and will also be submitted to National Treasury, the FSB, the Parliamentary Portfolio Committee on Finance and the National Credit Regulator (NCR) as well as to the boards of the LOA and the SAIA.

Joubert says any stakeholder or member of the public in possession of relevant information and willing to submit this to the panel of enquiry is invited to submit this information in writing to the panel before September 21, 2007.

Further instructions, the necessary forms as well as the terms of reference are available from the LOA web site (www.loa.co.za) or the SAIA web site (www.saia.co.za).

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