What is insurance?
Insurance is a mechanism that entails the reduction or minimisation of loss, owing to risk or the constant exposure of people to risk.
It can be regarded as a contract between an insurer and an insured individual, whereby the insurer undertakes to render to the insured a sum of money, or its equivalent, on the occurrence of a specified uncertain event in which the insured has some interest. The insured pays a premium to the insurer for these services.
South African insurance law is governed mainly by Roman-Dutch law as its common law. As part of the regulations of this industry, the government has incorporated the Insurance Act of South Africa to control activities. The Act is separated into two distinct Acts, namely:
Long Term Insurance Act 52 of 1998
Short Term Insurance Act 53 of 1998
Depending on changing circumstances within the insurance sector in South Africa, these Acts may be amended accordingly, following the correct procedures by law. The Acts provide protection for policyholders’ rights.
Long Term Insurance Act 52 of 1998:
This Act stipulates that any person carrying on any kind of long term insurance business must be registered as a long-term insurer and should be authorised under the Act. Entities are required to apply to the Registrar to become a long term insurer.
This type of insurance is mainly related to an insured person’s life or wellbeing.
The Act covers aspects such as:
- Limitations on a business
- Maintenance of financially sound conditions
Short Term Insurance Act 53 of 1998:
Short Term insurance in South Africa is regulated by the Financial Services Board.
This Act provides for the registration of short term insurers and it controls the activities and administration of these insurers and intermediaries. The Act also regulates policies, commissions, premium collection as well as claims handling.