The Short-term Insurance Act is exempt from the provisions of the CPA for a period of 18 months until 1 October 2012. Those insurance sector lows must be aligned with the consumer protection measures in the CPA or the provisions of the CPA will apply to insurers. The CPA protects, as consumers, all individual natural persons and small business with assets or annual turnover less than R2 million.

On a permanent basis, advice or intermediary services provided by or on behalf of insurers under the Financial Advisory and Intermediary Services Act are exempted entirely because the FAIS Act already provides adequate consumer protection.

There are many provisions in the Consumer Protection Act that will need careful consideration when insurance laws are aligned in October 2012. Shifting of risk, disclaimers and exemptions are presumed to be unfair unless in the circumstances they are shown to be fair certain disclaimers and exemptions are either unfair or need to be drawn to the consumer's attention in a plain manner and in plain language with a full explanation of the implications for the consumer.

Insurers must also bear in mind that they will be bound by the Consumer Protection Act in relation to business which is not related to the underwriting and assumption of risks, or the provision of advice and intermediary services under the FAIS Act. Insurers who engage in other business or activities will have to be aware of the provisions of the CPA. Even something as simple as an 'owner's risk' clause in a parking garage attached to the business of the insurer will require minimum compliance in regard to any disclaimer.

Insurers who deal in replacement goods or salvage will have to take into account provisions of the CPA whenever they deal with protected consumers (including all natural persons) in a transaction not directly related to the insurance policy. Even if the salvage is disposed of on behalf of the insured (urgently after a fire for instance) and goods are sold to a protected consumer (any individual or small business), then the CPA will have to be complied with in all its details. Consumers have extensive rights in relation to goods purchased and those rights may only be limited by the supplier giving a specific description of any potential defects in the goods or the circumstances affecting the sale. If secondhand salvaged goods are being disposed of, a very clear description of the state of what is being sold will be necessary. If the goods sold present a significant risk of personal injury or damage to property because of defects resulting from damage or if their quality cannot be warranted in any way, then this needs to be pointed out to the consumer even if the defect is patent. If the goods sold actually cause someone personal injury or damage to property, the affected person can claim damages without proving negligence even if the goods were sold to a corporate buyer.

There will be major contractual challenges for insurers when the CPA provisions (or the policyholder protection equivalent) apply to insurers in October 2012. Insurers should not wait till October 2012 before thinking about what is required of them and policies must be considered now.

A further consideration is the use of administration companies. If the insurer uses an administrator (as opposed to an intermediary governed by the FAIS Act), the administrator will not be entitled to the exemption relating to FAIS Act advice and intermediary services. Administration services will be governed by the Consumer Protection Act. For instance, the services to a consumer have to be of a standard that the consumer is generally entitled to expect and services must be performed on time or within a reasonable time if there is no specific deadline.

In short, any supply of goods or service to an individual or small business consumer is closely governed by the CPA if it is not an exempted insurance or FAIS transaction. Insurers must consider everything they supply to individuals or small businesses to see that they are compliant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.