Category Legal Affairs

What is personal lines business?

28 February 2018 Patrick Bracher, Norton Rose Fulbright
Patrick Bracher from Norton Rose Fulbrught.

Patrick Bracher from Norton Rose Fulbrught.

Despite objections at the comments stage, the Registrar of Short-term Insurance has defined a ‘policy’ for the purposes of the Policyholder Protection Rules as a short-term policy where the policyholder is a natural person or a juristic person with an asset value or annual turnover less than the R2 million threshold.

That has ridiculous consequences.

It means that, for instance, a professional person (say an engineer, doctor, lawyer) who carries on business in his/her own name rather than through a company is protected by the PPR. A farmer whose farm is owned by a corporation has to be differently treated by the insurer than one who farms as an individual.

The problem starts in the Act itself which has a similar definition. This means that the individual policyholder carrying on business is entitled to a copy of their policy within 30 days but the person who acts through a company is not. Similarly, a pay-as-paid clause is void for an individual but a corporation can enter into such an arrangement in writing.

Now we have 52 pages that applies to some business people and not others. The previous Policyholder Protection Rules used to define a policy as a short-term policy where the policyholder is a natural person ‘acting otherwise than solely for the purposes of the person’s own business’. That is rational. What we have now is not rational. Legislation is supposed to be rational and can be set aside by a court if it is not. Unfortunately seeing the mess is already contained in the Act itself, the review application may not succeed.

The Policyholder Protection Rules worked well previously. What has happened to the principle of ‘if it is not broken don’t break it’?

First published by Financial Institutions Legal Snapshot.

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