Everything You Need To Know About The New Insurance Act

The Insurance Act 2017 was signed into law at the beginning of this year. Here’s everything you need to know about the legislation…

South Africa’s insurance industry is growing at an unimaginable speed. There are so many players involved that it was only a matter of time before the government began to impose regulations. The Insurance Act, 2017, was signed into law on 17 January 2018. The Act provides a united legal framework for the practical supervision of the budding South African insurance sector. But, in layman’s terms, what does it mean and why does it exist?

We know that this new framework is consistent with international standards for insurance regulation and supervision. We know that the Act will replace and combine many parts of the Long-Term Insurance Act and the Short-Term Insurance Act.

The date of commencement of the Insurance Act, 2017 is yet to be proclaimed. In the meanwhile, for those who would care to read the Act in its thrilling entirety, it can be found HERE.

Otherwise, we’ve got everything you really need to know.

The Insurance Act 2017

One notable function of the Act is that it will seek to provide stricter regulation of foreign-based insurers which are underwriting risks in South Africa. This is to throttle the solicitation of insurance and reinsurance business by foreign insurers / reinsurers from within SA.

The Act will prohibit these foreign companies from soliciting business in South Africa on a cross-border basis. Unless, of course, the reinsurance company conducts reinsurance business through a branch established in South Africa. No direct insurance will be licensed, however.

Also read: Bending the truth when applying for car insurance 

This is a good thing. Foreign insurers need to be monitored in order to ensure the safety and soundness of insurers in general.

Furthermore, the new prudential framework – called the Solvency Assessment and Management (SAM) framework – has been developed to improve policyholder protection.

It will contribute to financial stability through aligning insurers’ regulatory capital requirements with the underlying risks. Are insurers able to meet their long and short-term promises to their clients? Can the insurer remain financially stable, and continue to pay claims?

The law will therefore ensure that the less-wealthy will be protected from any outcomes arising from market failures.

Parliament will be able to ensure that the insurance sector is aligned with international standards. It must be inclusive, stable and live up to higher prudential standards.

Unlike Parliament itself, then.

Either way, the legislation aims to bring about a safe and fair insurance market. More providers of financial services will be brought into the regulatory net and micro-insurers will have an easier time accessing the market.

And that’s about it. The Insurance Act 2017, in a nutshell.

The above content was supplied by CompareGuru.

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