Opportunity in consumer protection

The Consumer Protection Act (CPA) is to be promulgated in December and is set to broaden the rights of all consumers in South Africa. How this will impact brokers and insurers in the short-term insurance industry?

The CPA will invariably lead to an increase in the responsibilities of suppliers, manufacturers and retailers of products and services. "Many advisors are still reeling from the FAIS regulations and could be forgiven for thinking that over-regulation is on the cards," says Camargue Underwriting Managers Liability Underwriter, Simon Colman.

Small leeway

"The truth is that the insurance industry has been granted exemption from the Act. It should be taken into account, however, that it's a conditional exemption for a period of 18-months, during which time the industry must bring the Short-Term Insurance Act in line with the CPA," says Colman. "Sounds easy when considering the FAIS and the ST Insurance Acts already protect consumers."

Dealing with terms, conditions and exclusions

Some degree of protection for insurance consumers already exists, especially relating to the advice that is rendered by insurance practitioners. "The concern being raised within the industry relates to the section of the CPA (49) that deals with the manner in which terms, conditions and exclusions are brought to the consumer's attention. The CPA states that this should be done in a conspicuous manner. Bearing in mind the complexities of insurance contracts (especially commercial policies) this may prove to be difficult and would certainly make things more difficult for those transactions that take place without an intermediary," says Colman.

Opportunity for differentiation

While the industry has some time to deal with these issues, Camargue believes that progressive insurers and brokers are seeing this as an opportunity to improve on product summaries and marketing material.

"Perhaps the time has come to shift the public perception that insurers hide behind cleverly worded exclusions and the infamous "small print". Contracts that are written in plain language and that are tailored to specific industries and environments may prove to be both more marketable and compliant with regulations. Such contracts could possibly use language that is common to those industries. This is already done extensively in the hospitality sector, by way of example."

Further to this, insurers that offer effective risk management services provided by professionals may also find that clients are more informed about their obligations under their insurance contracts and have an open channel to the insurers when real issues arise.

For example, if an insurer has provided a client with access to an expert in quality control or workplace safety, that client will have a greater understanding of where their responsibilities to mitigate risk end and where the insurer's obligations to cover losses begin. Potential product liability claims and third-party injuries can be better managed and insured this way.

"Incidentally, due to the far reaching impact of the CPA and the insured's own increased duty of care to their direct customers, the benefits of such a risk management initiative would have a knock on effect, ultimately protecting each consumer in the supply chain from the buyer of the product, to the supplier and manufacturer, to the insurer of the entire process," says Colman.