On 12 January 2024, a member of Parliament, Mr Nqabayomzi Kwankwa of the United Democratic Movement, issued a notice of intention (“Notice”) to introduce a private member’s Bill (“Proposed Amendment Bill”), which Proposed Amendment Bill will seek to amend the Long-term Insurance Act, 52 of 1998 (“LTIA”).
In terms of the explanatory summary contained in the Notice, the rationale mooted for the introduction of the Proposed Amendment Bill are as follows:
- the LTIA does not currently provide for a due diligence exercise to be conducted by life insurers who offer funeral insurance products in order to determine whether policyholders or prospective policyholders already have funeral insurance policies for the same life event;
- policyholders enter into multiple funeral insurance policies issued by the same life insurer in respect of the same life event, and have various beneficiaries listed under such policies;
- holding multiple funeral insurance policies issued by the same life insurer results in some policy benefits under certain of the funeral insurance policies not being paid due to the benefits implications of holding multiple funeral insurance policies;
- such policyholders are not aware of the implications of having multiple funeral insurance policies issued by the same life insurer in respect of the same life event, and only become aware of such implications at claim stage; and
- policyholders are being prejudiced as such policyholders pay premiums for the multiple funeral policies where no benefit is paid to the beneficiaries, and some beneficiaries are being prejudiced as some of the beneficiaries will not receive policy benefits.
To mitigate against such policyholder and beneficiary prejudice, it is proposed that the Proposed Amendment Bill be introduced into Parliament to amend the LTIA, to:
- require the Financial Sector Conduct Authority to prescribe rules related to protecting a policyholder of multiple funeral policies, and to require a life insurer that underwrites funeral insurance policies to provide clarity within a certain period to existing policyholders related to the consequences of holding multiple funeral policies for the same beneficiaries;
- provide that non-disclosure of a funeral policy does not affect the validity of an affected funeral policy as it pertains to a beneficiary;
- provide that a policyholder of a funeral policy is entitled to cancel any of the multiple funeral policies held for the same life event after being advised of the benefits implications thereof; and
- provide for a sanction to be imposed on a life insurer that underwrites funeral insurance policies in the event of a failure of to comply with the proposed prescribed rules and disclosure obligations as aforesaid.
The Proposed Amendment Bill has not yet been drafted. However, interested parties and institutions are invited to submit written representations on the proposed content of the Proposed Amendment Bill to the Speaker of the National Assembly before the 11 February 2024. Representations can be delivered to: The Speaker, New Assembly Building, Parliament Street, Cape Town, mailed to the Speaker, P O Box 15 Cape Town 8000, or emailed to speaker@parliament.gov.za and copied to nkwankwa@parliament.gov.za.
Once the proposed Amendment Bill has been introduced, copies of such may be obtained from the United Democratic Movement as set out in the Notice.
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