A Brief Review of the Insurance Industry In South Africa
The Insurance Industry in South Africa has seen many changes during the past 100 years
, including the rise of three major Insurance Acts as well as the Financial Services Board established in 1990.The Insurance Act of 1923, also titled "Freedom with Publicity" was the first Act passed by the Union Parliament and was based on the principles of the United Kingdom Assurance Company Act of 1909. It provided policies with regards to insolvency as well as marriage. Even though there were no regulations to govern how the funds were invested, everything had to be fully disclosed to the public, hence Freedom with Publicity. The market was then used to determined value and stability of each client, or insurer. Many people questioned the adequacy of public control, especially how financial institutions were supervised, and feared that too much control would have the opposite effect and thus defeat the purpose.
The introduction of the Insurance Act passed in 1943, also referred to as "Control Legislation," saw The South African Free Market Foundation questioning its significance. The SAFM Foundation claimed that by forcing South African insurers to invest a considerable amount in government bonds and bills, the state had control over all financial institutions by means of the Du plum Rule, or "prescribed asset" requirements. This protected debtors to some extent but many investors lost money because debt became less valuable due to rising interest rates. Many investors were exposed to capital losses, and these included pensioners and widows. The 1943 Act also saw the rise of the "Financial Institutions' Office" and a Registrar of Insurance who was The Minister Of Finance.
A Statutory Regulatory Board was created in 1990 to supervise all financial institution under the supervision of the Financial Institutions' Office and this board was known as The Financial Services Board. The FSB is the main controller of the Financial Services Industry, and supervise laws with regards to insurance companies, pensions funds, unit trusts, etc. It consists of two divisions, namely: Registration and Policy, and Prudential Supervision. A new Insurance Act was introduced in 1998, giving more protection to policy holders with the exemption of the Du plum Rule amended in 1977. In its basic form, the Du plum Rule stated that when unpaid interest becomes equal to outstanding capital, no further interest could be charged.
In South Africa, the Insurance Industry is an every changing entity. With so many insurers looking beyond conventional markers, Insurance Companies are constantly evolving in complexity to keep up with the latest trends. Add to this external contributing factors such as high risk ratings for crime and safety. Other factors include capital preservation and changes in the climate and weather patterns, as well as regulation of the Insurance Acts. This is where risk management plays a crucial role. If these factors, and more, are not managed properly, it could affect a client negatively during the claims process.
South African clients can rest assured that our insurance companies constantly strive to meet these demands, and enhance the service required. The Industry has proved that it can withstand a financial recession and difficult market related conditions.
A Brief Review of the Insurance Industry In South Africa
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