Legal updates and opinions
News / News
Exemptions for certain short-term insurers providing premium relief
by Hilah Laskov, Senior Associate and Chelsea Roux, Candidate Attorney
Reviewed by Shayne Krige, Director and head of the Investment Funds & Private Equity practice
The FSCA has allowed insurers to provide premium relief to policyholders who may be unable to pay their insurance policies due to the financial pressures caused by the COVID-19 pandemic. The FSCA has issued additional exemptions from the Regulations dealing with the payment of commissions for short-term insurers providing such premium relief.
- Background
On 17 April 2020, we advised that a number of insurers had approached the Financial Sector Conduct Authority (the “FSCA“) to request permission to grant premium relief to policyholders who may be unable to meet their insurance policy obligations due to the COVID-19 pandemic.[1]
The FSCA, in a notice[2] (the “First Notice“) published on 15 April 2020, responded to these requests by allowing insurers and independent intermediaries to make use of premium relief[3] and by providing an exemption to insurers who grant such premium relief (“Entities Providing Premium Relief“) from, amongst others, the requirement under the Regulations under the Short-Term Insurance Act[4] (the “Regulations“) that commission may only be paid once the premium is paid to the insurer[5] (the “First Exemption“). The First Exemption was made subject to certain conditions.
- Exemption for short-term insurers and independent intermediaries
On 23 April 2020, the FSCA published a notice[6] (the “Second Notice“) which withdrew and replaced the First Notice.
The Second Notice provides that Entities Providing Premium Relief are exempt from compliance with the requirement under the Regulations that commission may only be paid once the premium is paid to an insurer[7], as was the case with the First Notice, and goes further to provide that Entities Providing Premium Relief are also exempt from the requirement that any commission paid in respect of the policy must not exceed the maximum allowable commission[8] (the “Second Exemption“).
The Second Exemption is subject to the conditions that:
2.1 the premium relief is granted in relation to an existing policy[9] of which the policyholder is in good standing with the insurer; and
2.2 any commission paid in respect of the policy subject to the premium relief must not exceed the prescribed maximum allowable commission, whereas a reference to “premium” in the Regulations[10] must be read as the premium that would have been payable had it not been for the premium relief.
- Commencement and duration
The Second Notice is effective as of 23 April 2020 and will remain effective until amendment or withdrawal by the FSCA by notice on its website.
- Breach of the notice
Non‑compliance with the conditions
provided in the Second Notice will result in the exemptions no longer being
applicable to that short-term insurer.
[1] See Financial Services Sector Update 6 sent on 17 April 2020.
[2] The exemption was granted in FSCA INS Notice 6 of 2020 published on 15 April 2020.
[3] “Premium relief” means a temporary release from the obligation to pay the premium payable under an existing policy in whole or in part, either by –
(a) allowing the non-payment of premium for a limited amount of time;
(b) allowing for an extended period of grace for the payment of premium; or
without reducing or limiting any policy benefits under the policy.
[4] GNR.1493 of 27 November 1998: Regulations under section 70 of the Short-term Insurance Act 53 1998 (Government Gazette No. 19495) (“Regulations“).
[5] Regulation 5.2 of the Regulations.
[6] FSCA INS Notice 8 of 2020.
[7] Regulation 5.2 of the Regulations.
[8] Regulation 5.3(1) of the Regulations.
[9] “Existing policy”, as defined in the Notice, means a policy entered into before the date on which the Notice is published.
[10] Regulation 5.3(1) of the Regulations.
Latest News
Bafana Bafana’s World Cup qualification hanging by a thread
by Brendan Olivier, Director and Daniel Gewer, Candidate Attorney Bafana Bafana's prospects of taking to the field at next year's [...]
ESG, the key to sustaining the construction sector?
by Justin Duarte, Candidate Attorney, reviewed by Natalie Scott, Director and Head of Sustainability and Jennifer Smit, Director and Head [...]
SME cashflow threats: ensuring that your security offers a protection against payment default
by Brendan Olivier, Director It's becoming all-too-common: an SME that provides goods and services on credit to a major supplier [...]
SME cashflow threats: ensuring that your contracts are worth more than the paper they are written on
by Brendan Olivier, Director When a key commercial supplier, or valued customer that is benefiting from long-standing payment terms and [...]
The Road Ahead: The SCA Gives Green Light to Vehicle Lenders “On the Road Fees” Under the NCA – Subject to Strict Disclosure Requirements
by Armand Swart, Director In a recent judgment, the Supreme Court of Appeal ("SCA") considered if, in terms of the [...]
You can’t have it both ways: Contractors who act like businesses must live with the consequences
by Bradley Workman-Davies, Director When you run your work as a business, invoice for your services, and elect to [...]