Think you know everything about life insurance
The life insurance industry is a complex mix of insurers, actuaries, tied agents, brokers and regulators. It takes new entrants to the industry years to become familiar with its workings. I’ve been reporting on life insurance news and events since January 2007 and often yearn for a more comprehensive knowledge of the industry. This wish has been granted with the publication of LexisNexis’ Life Insurance in South Africa, a Compendium. The book, billed as a perspective from the office of the Ombudsman for Long-term Insurance, was co-authored by Judge PM Nienaber and Professor MFB Reinecke. Copies of the book can be ordered from LexisNexis online.
Gerald Friedman, formerly the chairperson of the Ombudsman Council, believes the book will be of immense value to anyone studying the industry or contemplating or assessing a claim. The book is ‘recommended reading’ for role players across the life insurance industry, including agents, intermediaries, claimants and legal representatives. “The work covers the entire insurance law field in language and style that should render it accessible to anyone with some understanding of the insurance industry and the law of insurance,” observes Friedman.
A wealth of information
The book has the look and feel of a university coursework; but it reads easily. Life Insurance in South Africa is divided into 11 sections – far too many to cover adequately in a brief review. Instead we’ll comment on a few chapters that caught our eye. The first section is invaluable to those insurance law buffs, providing an overview of the nature of insurance contracts and the requirements for a valid requirement of insurance. Insurance law is stated at 1 July 2009 throughout.
The second section provides an overview of the South African long-term insurance industry. It covers the legislative framework, statutory and voluntary ombudsmen schemes and takes a closer look at relevant industry bodies and organisation. Judge Nienaber’s experience as Ombudsman for Long-term Insurance – he was appointed to the position in 2002 – has proven invaluable as the authors painstakingly unpack the functioning of the consumer watchdog. Life Insurance in South Africa is worth the read just to gain insight into the Ombudsman’s complaints resolution process alone.
We really enjoyed the three chapters in section C of the book, covering long-term insurance concepts. The authors share their detailed knowledge of the insurance concepts that shape insurance policies and insurance products to this day. They also provide an in depth look at the evolution of insurance product in South Africa before commenting on various modern day insurance mechanisms.
Getting to the ‘nuts and bolts’ of contracts
Lawyers will love sections D through G. These are largely technical discussions on the conclusion of long-term insurance contracts, the contents of the long-term insurance contract, the participants, and the principal obligations. These chapters include just about everything there is to know about the obligation between insurer and policyholder when it comes to performance on a long-term insurance contract!
An Ombudsman’s view on the long-term insurance environment wouldn’t be complete without an assessment of possible ‘flash points’. Section H, which deals with misrepresentation and misconduct, tackles policyholder fraud and non-disclosure among other possible problems. The section includes a chapter on misconduct by or on behalf of insurers, and culminates by warning industry participants of the censures available to regulators against misconduct by insurers or intermediaries.
Industry experts will enjoy the section on defences open to insurers. The authors spend a couple of pages discussing general defences and time constraints. A separate section handles the cession of policies, the sale of second-hand policies, and the termination of rights and obligations in insurance policies.
Plenty of product detail!
Life Insurance in South Africa ends with a look at specific life insurance product applications. An entire chapter is dedicated to each of the following: annuities (including compulsory, guaranteed, with-profit, living and voluntary annuities); disability, impairment and critical illness insurance; funeral insurance; and consumer credit insurance. Each of these products has been under the spotlight in recent years as regulators crack down on issues of transparency around matters such as cost, commission, investment returns and termination / surrender penalties.
Running to just more than 400 pages Life Insurance in South Africa is a valuable addition to the library of any financial services professional. And it’s a definite must for anyone conducting business in the life insurance space. The publishers have been kind enough to offer three books as ‘prizes’ for FAnews Online readers. In keeping with tradition we will forward a copy of the book to the first three readers who supply their name, contact telephone number and postal address – plus the answer to the following question – to editor@fanews.co.za
Competition question: Who is the current Ombudsman for Long-term Insurance?
