Insurance

Sources of insurance law

Common law Constitution Insurance Act

Insurance Act

Insurance business - life insurance business or non-life insurance business

conducted or regarded as being conducted in the Republic, and includes
reinsurance business

Insurance policy -a life insurance policy or a non-life insurance policy

Insurer-aperson licensed to conduct insurance business under this Act, and

includes, unless specifically otherwise provided for in this Act, Lloyd's, a Lloyd's
underwriter and a reinsurer

Life insurance business- any activity conducted with the purpose of entering into or
meeting insurance obligations under a life insurance policy

Life insurance policy any arrangement under which a person, in return 55 for
provision being made for the rendering of a premium to that person, undertakes
to meet insurance obligations
(a) on the happening of a life event, health event, disability event or death event; or

(b) on or from a fixed determinable date or at the request of the policyholder, but
excludes

(i) a deposit with an institution authorised under the Banks Act, 1990
(Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993), or
the Co-operative Banks Act, 2007 (Act No. 40 of 2007); and 5
(ü) participatory interests in a collective investment scheme registered in
terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45
of
 2002), and includes a renewal or variation of that arrangement

Non-life insurance business- any activity conducted with the purpose of 40 entering
into or meeting insurance obligations under a non-life insurance policy

Non-life insurance policy- any arrangement under which a person, in retum for
provision being made for the rendering of a premium to that person, undertakes to
meet insurance obligations that fully or partially indemnifies loss on the happening of
an unplanned or uncertain event, other than

(a) a life event; or

(b) a death event or disability event not resulting from an accident,

and includes a renewal or variation of that arrangement

Policyholder - (a) the person with whom or with which an insurer enters into a life
insurance policy or a non-Hife insurance policy; or (b) the successor in title of the
person referred to in paragraph (a)

Premium - any direct or indirect, or partially or fully subsidised, 5 consideration given

or to be given in return for an undertaking to meet insurance obligations

The Insurance Act replaces all prudential aspects of the Short-term Insurance Act
and Long-term Insurance Act.

Parties involved

Insurers - refer to above definition. Must be duly registered and incorporated.

Intermediaries - insurers are represented by an agent or the insurance is procured

througha broker or may/may not be a representative of the insurer.

Individuals - in terms of the FAIS, any natural who is, either solely or in conjunction
with other similar persons, responsible for managing or overseeing the activities of
an entity, trust or partnership in respect of the delivery or any financial service, if the
entity only has one natural person as member, director, shareholder or trustee, then
that person is described as the key individual.
Non-life and life insurance

Indemnity

Short-term insurance (refer to above definition)

The amount of damages claimed is directly proportional to the patrimonial
damage suffered.
The amount received by the insured cannot exceed the amount of actual loss.
There must be a valid contract of insurance, fulfilment of suspensive
conditions, the risk must have materialised, there must be a loss, and the
existence of an insurable interest prior to the materialisation.

Non-indemnity

Long-term insurance (refer to above definition)

Loss suffered and the amount paid are not necessarily proportionate.
The interest is non-patrimonial.
When the risk occurs, the insurer is liable to pay only a specific contractually
agreed amount to the insured.

Three main differences

In the case of indemnity insurance, the insurable interest has to exist at the
time of loss. In the case of non-indemnity insurance, it must already exist at
the time of conclusion of the insurance contract.
Rules of proportionate contribution and subrogation apply to indemnity but not
to non-indemnity insurance.
In the case of indemnity insurance, the insurer's liability is limited to the
amount of damages actually incurred. In the case of non-indemnity insurance,
the insurer's liability is not limited to the amount of damages actually incurred.

Different types - First party and third party; Property insurance; Personal lines
and commercial lines; Microinsurance; Reinsurance: Valued and unvalued.
Twin Peaks model

Two regulators are established

1. Maintaining the stability of the financial system (prudential authority)
2. Market conduct and consumer protection
Ensure the financial sector grows in a more transformed and inclusive manner
Support the entry of new institutions into the market, and facilitate the growth
and development of existing institutions
Providing access to appropriate and suitable financial products and services
to South Africans

FSCA

The supervisory authority is the Financial Services Conduct Authority

established by the Financial Sector Regulation Act
Replaces the old Financial Services Board
The FSB was a corporate body referred to as the 'Regulator', but the new
FSCA is known as the 'Authority
It aims to ensure financial institutions treat financial customers fairly, enhance
the efficiency of the financial system, and educate financial customers and
provide financial literacy

Prudential Authority

The Twin Peaks system replaces the Reserve Bank with the Prudential
Authority in overseeing FSPs
The prudential regulator's supervisory approach is based on ten principles
The principles aim to balance the increasing principles-based and current
rules-based components