Tight New Restrictions for White Label Insurance Products

May 20 - The South African insurance industry may soon be experiencing a number of significant changes in terms of white label insurance, due to recent events that have led to authorities determining the need to change the current laws.

Under present legislation, there exists a grey area whereby it is not quite clear who is responsible for insurance disasters - the insurance license holder, or the companies to whom they rent out their licenses, known as white label insurance products.

A number of cases involving the abuse of white label insurance products have recently emerged in the South African market. The most controversial? involves license holder Metropolitan Life, who is being held responsible for money that was taken wrongfully by the now liquidated white label company, Ovation investment services for Metropolitan's living annuity plan for pensioners. Metropolitan is objecting to the fact that it needs to be held liable for the lost money.

The new legislation will reiterate once and for all that the responsibility for all binder agreements, or white label insurance products as they are more commonly known, falls on the license holder. According to these terms, the license holder will be liable for any claims that relate to the insurance policies, including claims that arise should the white label company fail to comply with an agreement with the life assurance company.

In simpler terms, the insurance license holder will remain responsible for the compliance with the country's Long Term Insurance Act.

The new legislation in fact strengthens the position held by the Financial Services Board and clarifies any doubts that license holders may have on the issue.