Some of the major changes in the Insurance Industry during the last century, include the establishment of the Financial Services Board in the early 1990’s as well as the regulation of the three main Insurance Acts.

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.

The FSB, or Financial Services Board, was established in 1990 and served as a Statutory Regulatory Board with the purpose of supervising all the institutions governed by the Financial Institutions’ Office. Today, the FSB is the main controller of the Financial Services Industry and its purpose is to supervise laws and regulations related to insurance companies and pension funds by means of the Registration and Policy Revision, and the Prudential Supervision Division. The insurance Act of 1998 protected the policy holders to greater extent by abolishing the Du plum Rule introduced in 1977. The Du plum Rule declared that when interest is equal to unpaid capital, no further interest should be charged.

We can see from this brief review that the South African Insurance Industry is constantly changing. Insurance companies are evolving in complexity to keep up with the current markers, and go beyond what is expected. External factors also contribute to these changes, and these include crime and safety ratings, as well as the ever changing weather conditions. Risk management truly plays a vital role in all of this. If these factors are not managed to the full extent required, a client’s claims process could be negatively affected by poor risk management.

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.