South Africa: Corporate Insurance And Risk Management: Consumer Protection Act

Last Updated: 18 March 2010
Article by Donald Dinnie

This article was originally published by

Insurers doing business in South Africa will now have to acquaint themselves with the workings and ramifications of the Consumer Protection Act, 2008 which comes into effect in October 2010.

The Act:

  • Will affect the operations of insurers directly and indirectly;
  • Regulates the relationships between consumers and suppliers in respect of defined services.

Consumers will include insureds, to the extent that the insured is not the State or juristic personalities whose asset value or annual turnover at the time of the transaction which is the subject of any complaint equals or exceeds a threshold value still to be determined by regulation.

Accordingly, personal lines policies and low value commercial and corporate insurance will be affected.

The Act's broad definition of service includes "... the undertaking, underwriting or assumption of any risk by one person on behalf of another... ". That service is, however, excluded to the extent that it:

  • Constitutes advice or intermediary services that are subject to a regulation in terms of the Financial Advisory and Intermediary Services Act, 2002;
  • Is regulated in terms of the Long-term Insurance Act, 1998 or the Short-term Insurance Act, 1998.

The important qualification of the exemption is the phrase "to the extent that". There is no blanket exclusion of insurance services from the ambit of the Act. Schedule 2 of the Act assumes the exclusion of the Short-term Insurance Act and Long-term Insurance Act from the ambit of the Act but is subject to "... those sector laws being aligned with the consumer protection measures provided for in this Act within a period of 18 months from the commencement of this Act, failing which, the provisions of this Act will apply".

Unless the insurance legislation is aligned with the consumer protection measures by April 2012, the default position will require compliance with the Consumer Protection Act.

One way or the other, insurers cannot ignore the provisions of the Act.

It is likely that some amendment of the insurance rules and regulations will be necessary. The Short-term Policyholder Protection Rules, for example, provide some protection to personal lines policyholders in the context of policy format and prohibitions against ambiguity. Those provisions are, however, not as extensive as the plain and understandable language provisions of the Act which provides that a written policy must be in plain language. The National Consumer Commission, created by the Act may publish guidelines for assessing whether a document satisfies the plain language requirements and guidelines may be published for public comment.

The document is in plain language if it is reasonable to conclude that an ordinary consumer (policyholder):

  • Of the class of persons for whom the document is intended;
  • With average literacy skills; and
  • Minimal experience as a consumer of insurance services;
  • Could be expected to understand the content, significance and import of the document without undue effort, having regard to: (i) the context, comprehensiveness and consistency of the document; (ii) organisation, form and style; (iii) vocabulary, usage and sentence structure; and (iv) the use of any illustrations, examples, headings or other aids to reading and understanding.

The requirement is one of plain language, not plain English. It is unconscionable for a supplier (insurer) to take advantage of an insured who is substantially unable to protect their own interests because of physical and mental disability, illiteracy, ignorance, inability to understand the language of an agreement or any other similar factor.

Accordingly, an insurance product marketed to a consumer base whose language is not English will need to be marketed and transacted with those insureds in their own language.

The prohibition against unfair, unreasonable or unjust contract terms, or a price that is unfair, unreasonable or unjust or marketing, negotiating or administering a transaction in a manner that is unfair, unreasonable or unjust formally introduces a test of equity into our law (a concept with which both the voluntary insurance Ombudsmen already have been grappling) and will expand the basis for challenging policy terms and conditions.

Amongst other things, a term or condition is unfair, unreasonable or unjust, if:

  • It is excessively one-sided in favour of any person other than the consumer; or
  • The terms and conditions are so adverse to the consumer as to be inequitable;

A provision in the policy which limits the risk or liability of the insurer (for present purposes, read exemptions and exclusion clauses in policies) must:

  • Comply with the plain language provisions of the Act; and
  • The fact, nature and effect of that provision must be drawn to the attention of the insured: (i) in a conspicuous manner and form that is likely to attract the attention of an ordinary, alert insured, having regard to the circumstances; and (ii) at the time when the transaction is entered into or the insured was required to make or offered consideration for the transaction; and
  • The insured must be given adequate opportunity in the circumstances to receive and comprehend those provisions.

The Act provides for class actions and in so doing exposes insurers to increased challenges. Power is given to accredited consumer protection groups to initiate actions to protect the interests of consumers individually or collectively. Contravention of the plain language requirement and prohibition against unfair, unjust or unconscionable terms and provisions will not only create the basis for a successful challenge by the insured of a particular policy or policy term but will also expose the insurer in cases where there has been prohibited or required conduct (for example, where there has previously been a complaint about policy wording which is not in plain language and a directive issued that conduct cease) a potentially substantial administrative fine.

The Act now completely alters the South African common law of product liability and removes the requirement of establishing fault of the manufacturer, importer, distributor and supplier in causing harm.

The provision significantly increases the risk of exposure to liability of producers, importers, distributors and retailers for harm caused wholly or partly for:

  • Supplying any unsafe goods;
  • A product failure, defect or hazard in any goods;
  • Inadequate instructions or warnings provided to consumers pertaining to the hazard arising from or associated with the use of any goods;
  • Irrespective whether the harm resulted from negligence on the part of any of those persons.

Concomitantly, the underwriting risks of exposure for product liability insurers will increase.

The no-fault product liability provisions, and the safety monitoring and recall provisions of the Act do not fall within any exemptions under the Act and apply whether the consumer is a juristic person with asset value or turnover exceeding the promulgated threshold or the State.

There are very limited bases for escaping liability under the no-fault provisions. Probably the most commonly used defence will be that the distributor or retailer can establish that it is unreasonable to expect them to have discovered the unsafe product characteristic, failure, defect or hazard, having regard to their role in the marketing of the goods to consumers.

The National Consumer Commission can require a producer to conduct a product investigation or a product recall (subject to an appeal to the tribunal) even where the producer has investigated and declined to institute a recall.

Accordingly, product liability insurers should re-assess the underwriting risks under the no-fault product liability and recall provisions of the Act and take steps to ensure that those insureds who have significant exposure are alert to and understand the ramifications of the provisions, have in place appropriate quality control and risk control procedures and where possible, obtain appropriate indemnities from those in the supply chain.

Indemnities and disclaimers of liability cannot, in the context of product liability provisions be imposed upon the user of the goods since that would amount to an impermissible avoidance of those provisions of the Act.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions