Abstract
Transparency as a value is evident in a number of principles that apply to insurance intermediaries. These principles are found in common law rules and increasingly in statutory rules that regulate intermediaries and advisors. Consumers are protected by dedicated legislation that apply to insurance and to other intermediaries and advisors who sell financial products. This contribution evaluates all the rules pertaining to intermediaries and advisors and provides an overview of the structures that are in place to ensure that there is compliance with these rules. Overall, transparency as a value is evident from both statutory and common law rules, and increasingly, consumers of insurance products enjoy adequate protection as intermediaries and advisors are obliged to act in a way that is transparent.
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Notes
- 1.
See in general Agency and Representation in Joubert (ed) Law of South Africa (‘LAWSA’) at § 175; also Hutchinson and Pretorius (2017), chap 9.
- 2.
In practice, the term ‘agency’ is often used to denote: (a) the contractual relationship between P and A (the contract of agency); or (b) the phenomenon of A’s representation of P (agency as a function); or both (a) and (b)—in the sense of ‘the law relating to agency’. However, care should be taken not to confuse representation with the contract between P and A, for they are distinct legal concepts or phenomena.
- 3.
Rabinowitz & another v Nedequity 1980 (1) SA 403(W).
- 4.
Joubert (ed) ‘Mandate and Negotiorum Gestio’ The Law of South Africa (hereinafter ‘LAWSA’) at § 2; 6 and 11.
- 5.
See Mandate and Negotiorum Gestio in LAWSA 2 at § 11.
- 6.
In accordance with the maxim qui facit per alium facit per se.
- 7.
Randbank Bpk v Santam Versekeringsmpy Bpk 1965 (4) SA 363 (A).
- 8.
See in general Hutchinson and Pretorius (2017), chap 9.
- 9.
The majority judgment in the Constitutional Court recently in Makate v Vodacom 2016 (4) SA 121 (CC) at [45] held that estoppel is not in itself a form of authority but a rule to the effect that if the principal had conducted herself in a manner that misled the third party into believing that the agent has authority, the principal is precluded from denying that the agent had authority.
- 10.
Millner MA ‘Fraudulent non-disclosure’ (1957) 74 South African Law Journal 177 at 189; also ABSA Bank Ltd v Fouche 2003 1 SA 176 (SCA).
- 11.
Joubert (ed) ‘Agency and Representation’ in LAWSA 2 ed at § 200–209.
- 12.
- 13.
Reinecke et al General Principles 337, Havenga Insurance Intermediaries 2; Nienaber and Reinecke Life Insurance at 201.
- 14.
Havenga Insurance Intermediaries 4; Hattingh and Millard FAIS Act 75.
- 15.
Havenga Insurance Intermediaries 4; Hattingh and Millard FAIS Act 75.
- 16.
Havenga Insurance Intermediaries 4; Hattingh and Millard FAIS Act 75.
- 17.
S 1(1)(a) of the FAIS Act, sv ‘complaint’. ‘Financial prejudice’ or ‘damage’ all have a very specific meaning in law. See par 4.5 below for a discussion on this matter.
- 18.
See chap 2 above par 2.14 for a discussion of the meaning of ‘complaint’. There are great similarities between the powers of a civil court and that of the office of the Ombud. For instance, a determination by the Ombud has the same effect as a court order. However, the monetary jurisdictional limit on Ombud cases is limited.
- 19.
Generally speaking, the FAIS Act distinguishes between duties when rendering advice and duties when rendering intermediary services. When rendering advice, the advisor must gather information, conduct a suitability analysis, identify a suitable financial product, make disclosures about the financial service and keep a record of the advice. When rendering intermediary services, the intermediary must receive an instruction from a client, make disclosures pertaining to the financial service and product and then enter into a contract on behalf of the client or preform the intermediary service. See Hattingh and Millard (2016), pp. 128–131.
- 20.
130.
- 21.
Hattingh and Millard (2016), p. 130.
- 22.
In Huyser v Quicksure (Pty) Ltd and Another (Unreported case number 72006/2012; ZAGPPHC 24; [2017] 2 All SA 209 (GP) (3 February 2017)) the applicant entered into a written agreement to insure his car. When a claim pertaining to the loss of the car was repudiated, the applicant instituted action against the first respondent, only to learn that the action should in fact have been instituted against another party, New National Assurance Co Ltd as Quicksure in fact administered claims for New National. New National argued that the claim had in fact become prescribed as the application to join New National came more than three years after the debt had become due. In this particular case the court found that as the applicant only became aware of the identity of the debtor at a later stage, the claim had in fact not prescribed. Severe criticism was leveled against both Quicksure and New National for the way in which they conducted themselves. It is submitted that proper, up-front disclosure of the identity of all the parties would have avoided this conundrum.
- 23.
S 5(b) of the GCC.
- 24.
S 13(1)(b)(i) of the FAIS Act 37 of 2002.
- 25.
S 13(1)(b)(i) of the FAIS Act 37 of 2002.
- 26.
S 4 of the GCC.
- 27.
Hattingh and Millard (2016), p. 133.
- 28.
S 7(1)(b) of the GCC.
- 29.
S 7(1)(b) of the GCC.
- 30.
S 7(1)(d)(i) of the GCC.
- 31.
S 7(1)(d)(ii) of the GCC.
- 32.
S 7(1)(d)(iii) of the GCC.
- 33.
S 7(1)(d)(iv) of the GCC.
- 34.
S 7(1)(c)(i) of the GCC.
- 35.
S 7(1)(c)(viii) of the GCC.
- 36.
S 7(1)(c)(vii) of the GCC.
- 37.
S 7(1)(c)(xii) of the GCC.
- 38.
S 7(1)(c)(xiii) of the GCC.
- 39.
Secs 7(1)(c)(iv), 7(1)(c)(xiv) and 7(1)(c)(vi) of the GCC.
- 40.
See s 8 of the GCC.
- 41.
S 1 of the GCC, sv ‘financial interest’.
- 42.
Moolman et al. (2012), p. 169.
- 43.
Enforcement Committee Case Number 22 of 10 July 2012 visited at http://www.FSCA.co.za on 18 February 2013.
- 44.
Moolman et al. (2012), pp. 168–169.
- 45.
Reinecke et al. (2013), p. 523.
- 46.
Act 27 of 2008.
- 47.
Act 45 of 2013.
- 48.
Financial Services Board Retail Distribution Review (2014), http://www.FSCA.org.uk/docs/default-source/Publications/reports/FSCA-retail-distribution-review-2014.pdf?sfvrsn=0 (20-03-2016).
- 49.
Financial Services Board (n 50) 1.
- 50.
Financial Services Board Treating Customers Fairly. Status Update: Retail Distribution Review Phase 1: An update on the “Phase1” Proposals identified in the Retail Distribution Review (2015), https://www.FSCA.co.za/NewsLibrary/FSCA%20Retail%20Distribution%20Review%20Phase%201%20Status%20Update%202015.pdf (20-3-2016) (RDR Review Phase 1).
- 51.
RDR Review Phase 1 11, 16, 31, 37, 46.
- 52.
As an analogy see the he general statutory description in the Consumer Protection Act 68 of 2008 sec 49(2).
- 53.
See Lappeman Diamond Cutting Works (Pty) Ltd v MIB Group (Pty) Ltd and another [2003] 4 All SA 317 (SCA) par 43; also Zakhele G Buthelezi v Actebis 406 CC t/a Pro-Brokers and another (case number FAIS 07716/ 13-14/ WC 3. This also includes waivers, which are specificlly targeted by the new proposed Policyholder Protection Rules.
- 54.
See for example the requirements in manner and form set for notices in s 49 of the CPA.
- 55.
GCC s 4,5,7 and 8. Also Lappeman Diamond Cutting Works (Pty) Ltd v MIB Group (Pty) Ltd and Another par 44. See also FAIS Ombud’s determination in Palmerios Hospitality CC vs Willie du Plessis Financial Services (case no FOC 2372/06-07/EC (3)) where the Ombud concluded that there is a legal duty to make disclosures of material terms to one’s client when rendering financial services. On the facts of this particular case, the respondent had discharged such duty by sending a reminder to the complainant by sending him a reminder of his original advice to install a VESA approved immobiliser in the vehicle insured. Furthermore, the respondent had done everything reasonably necessary to draw Complainant’s attention to security requirements and as a result, the complaint was dismissed.
- 56.
Rule 11.4.2(a) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 57.
Rule 11.4.2(b) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 58.
Rule 11.4.2(c) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 59.
Rule 11.4.2(d) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 60.
Rule 11.4.2(e) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 61.
Rule 11.4.2(f) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 62.
Rule 11.4.2(g) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 63.
Rule 11.4.2(k) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 64.
Rule 11.4.2(m) of the Long-term PPRs. The short-term PPRs contain a similar provision.
- 65.
Financial Services Board Treating Customers Fairly. Status Update: Retail Distribution Review Phase 1: An update on the “Phase1” Proposals identified in the Retail Distribution Review (2015), https://www.FSCA.co.za/NewsLibrary/FSCA%20Retail%20Distribution%20Review%20Phase%201%20Status%20Update%202015.pdf (20-3-2016) (RDR Review Phase 1).
- 66.
Rule 2A.4.2.
- 67.
Rule 2A.5.
- 68.
Rule 2A.6.
- 69.
Rule 2A.7.
- 70.
Rule 2A.8.
- 71.
Rule 2A.9.
- 72.
Rule 2A.10.
- 73.
Rule 2A.12.1(a).
- 74.
Rule 2A.12.1(b).
- 75.
Rule 2A.12.1(c).
- 76.
For a concise summary of the structure of these ombud schemes, see Millard D Modern Insurance Law in South Africa (2013) chapter 9.
- 77.
Act 37 of 2004.
- 78.
S 10.
- 79.
S 11.
- 80.
See Barkhuizen v Napier 2007 (5) SA 323 (CC).
- 81.
See Muller v Sanlam Life Insurance Limited (1162/2015) [2016] ZFSCA 149 (30 September 2016).
- 82.
Rule 17.8 of the Long-term PPRs. The Short-term PPRs contain a similar provision.
- 83.
The Short-term PPRs contain a similar provision.
- 84.
Reinecke et al. (2013), p. 354.
- 85.
Reinecke et al. (2013), p. 354.
- 86.
Act 37 of 2004.
- 87.
2003; promulgated in terms of section 26 of the FAIS Act.
- 88.
Part XI of the General Code of Conduct for Authorised Financial Service Providers and Representatives.
- 89.
Rule 4(a)(iv) of the Ombud Rules.
- 90.
It may be mentioned that the jurisdiction of the lower courts or magistrates’ courts are far lower, and a claim of this nature brought before the FAIS Ombud will provide an obvious advantage to the insured as complainant.
- 91.
See par 2.3 above on the 3-year prescription period.
- 92.
S27(5) of the FAIS Act.
- 93.
Millard 149–150.
- 94.
Pension Funds Act 24 of 1956; section 30.
- 95.
Medical Schemes Act 131 of 1998; section 47.
- 96.
Act 73 of 2008.
- 97.
Section 1 of the Companies Act read with s. 8(2)(b). A profit company is a private company if it is not a state-owned company; and its memorandum of incorporation both prohibits the offer of any of its securities to the public and restricts the transferability of its securities. A public company may freely offer the securities of a public company to the public. See in general Cassim, F.H.I. (ed.) Contemporary Company Law 78.
- 98.
Case number 09/2013.
- 99.
Case number 23/2013.
- 100.
Section 1(1) of the Long-term Insurance Act, sv ‘assistance policy’.
- 101.
Case no 08/2014.
- 102.
Case no 11/2014.
- 103.
Case no 24/2015.
- 104.
Case no 26/2015.
- 105.
Case no 23/2015.
- 106.
See www.sfca.co.za (11 December 2018).
- 107.
Hattingh and Millard (2016), p. 167.
- 108.
3 of 2000.
- 109.
S 33 of the FAIS Act.
- 110.
S 34 of the FAIS Act.
- 111.
S 36 of the FAIS Act.
- 112.
See sec 32 of the FSRA.
- 113.
97 of 1990.
- 114.
www.FSCA.co.za, visited on 3 March 2017.
- 115.
Act 135 of 1998.
- 116.
Act 28 of 2001. See Hattingh and Millard (2016), p. 218 where the authors explain: ‘In short, all enforcement action is the task of the enforcement committee. This committee is an administrative body established to adjudicate on all alleged contraventions of legislation, regulations, codes of conduct etc. administered by the Financial Services Board. The Committee may impose unlimited penalties, compensation orders and cost orders. Such orders are enforceable as if it was a judgment of the Supreme Court of South Africa.’
- 117.
The Registrar of Financial Services Providers v Finstate CC case no FAIS 12/2013.
- 118.
The Registrar of Financial Services Providers v Hippo Comparative services (Pty) Ltd case no FAIS 08/2013.
- 119.
The Registrar of Financial Services Providers v Clifford Mey case no FAIS 11/2014.
- 120.
37 of 2002.
- 121.
Hattingh and Millard (2016), p. 223.
- 122.
See www.sfca.co.za.
- 123.
Cl 3 of the FSR Bill. See also Hattingh and Millard (2016), pp. 6–9.
References
Books
Hattingh W, Millard D (2016) The FAIS Act explained: a guide to understanding the Financial Advisory and Intermediaries Act 37 of 2002, 2nd edn. LexisNexis, Durban
Havenga P (2001) The law of insurance intermediaries. Juta Law, Pretoria
Hutchinson D, Pretorius CJ (eds) (2017) The law of contract in South Africa, 3rd edn. Oxford University Press, Cape Town
Joubert WA (ed) Mandate and Negotiorum Gestio to medical schemes. The law of South Africa, 2nd edn
Joubert WA (ed) Agency and representation. The law of South Africa, 2nd edn
Moolman J, Pillai C, Bam N, Appasamy J (2012) Financial advisory and intermediary service guide. LexisNexis, Durban
Nienaber PM, Reinecke MFB (2009) Life insurance in South Africa: a compendium. LexisNexis, Durban
Reinecke MFB, Van Niekerk JP, Nienaber PM (2013) South African Insurance Law. LexisNexis Butterworths, Durban
Case Law
Barkhuizen v Napier 2007 (5) SA 323 (CC).
Huyser v Quicksure (Pty) Ltd and Another (Unreported case number 72006/2012; ZAGPPHC 24; [2017] 2 ALL SA 209 (GP) (3 February 2017).
Makate v Vodacom 2016 (4) SA 121 (CC).
Rabinowitz and another v Nedequity 1980 (1) SA 403 (W).
Legislation
Constitution of the Republic of South Africa 1996.
Consumer Protection Act 68 of 2008.
Electronic Communications and Transactions Act 25 of 2002
Financial Advisory and Intermediary Services Act 37 of 2002.
Insurance Act 18 of 2017
Long-term Insurance Act 52 of 1998.
Policyholders Protection Rules for short-term insurance 2010.
Policyholders Protection Rules for long-term insurance 2010.
Short-term Insurance Act 53 of 1998.
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Kuschke, B., Millard, D. (2021). Transparency in Insurance Law and Regulation: In South Africa. In: Marano, P., Noussia, K. (eds) Transparency in Insurance Regulation and Supervisory Law. AIDA Europe Research Series on Insurance Law and Regulation, vol 4. Springer, Cham. https://doi.org/10.1007/978-3-030-63621-0_22
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