Consumer Protection Act
Ensure your business is ready for new plain language regulations
Submitted by byrnie on Wed, 2011-03-16 20:42Image/Video:
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Much has been made of the implementation of the Consumer Protection Act (CPA), which is due to come into force in October this year, and its impact on the insurance industry. One of these is the fact that all documentation that the insurer provides to consumers will need to be written in plain language.
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Much has been made of the implementation of the Consumer Protection Act (CPA), which is due to come into force in October this year, and its impact on the insurance industry. One of these is the fact that all documentation that the insurer provides to consumers will need to be written in plain language.
According to the provisions set out in the CPA, insurers must ensure that all of their policies are written in plain language, in terms that can be easily understood and without being unjust or unfair. The CPA also stipulates that any exclusions that limit the liability of the insurer also have to be drawn to the attention of the consumer in plain language.
The National Consumer Commission is due to publish guidelines soon regarding how to determine whether a document satisfies the CPA’s requirements. However, at MUA we are already rewording all of our documentation to comply with these new plain language requirements,at considerable cost and effort to the company, in order to be totally transparent with our clients and to avoid any possible non-compliance with the CPA in the future.
While this is an expensive and time consuming process for insurance companies, these new regulations are a welcome development to ensure consumers fully comprehend what their insurance policies cover.
However, the plain language requirements set out in the CPA do also present some serious implications for some brokers and their businesses as well.
A number of brokers – particularly those operating within large institutions - often have their own policy wordings for the documentation they provide to clients. As a result, they will also be responsible for ensuring that all paperwork that they prepare for clients also complies with the new legislation.
If an insurance company – or a broker – is deemed not to have complied with the plain language requirements, then clients will have recourse for legal action if their insurance claims are repudiated.
The CPA states that a document is in plain language if an ordinary consumer (policyholder) with average literacy skills and minimal experience as a consumer of insurance services, can be expected to understand the content, significance and import of the document without undue effort, having regard to:
- The context, comprehensiveness and cosnistency of the document;
- Organisation form and style;
- Vocabulary, usage and sentence structure; and;
- The use of any illustrations, examples, headings or other aids to reading and understanding
The introduction of the CPA means that in addition to the time, effort and cost of drawing up new paperwork, there is also now an increased risk on the part of the insurer and/or broker. If they are shown not to have complied with the CPA, there might be cost implications and/or reputational damage involved.
A broker’s own professional indemnity insurance may also need to increase in order to accommodate the new regulations. This will add increased cost pressures on brokers, who are already facing concerns over how they should charge for their services: through commission on the products they sell, for the advice and expertise they offer or through the number of hours they spend on a client.
In the long run, the plain language requirements are a good thing for the insurance industry as they should help to foster a greater level of understanding of our product offering among consumers, however, it is important for brokers and insurers alike to make themselves fully aware of the legislation and of how the CPA will impact on their business.
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Etv Sunrise Consumer Protection Act
Submitted by Guest on Tue, 2010-11-23 00:00Image/Video:
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An interview with MUA MD, Christelle Fourie on the Consumer Protection Act.
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An interview with MUA MD, Christelle Fourie on the Consumer Protection Act.
Companies need to comply with the CPA by reviewing all their documentation and making sure it is in plain language for the consumer to understand. Treating customer’s fairly - guidline by the FSB trying to change the image of the insurance industry from a grudge purchase to a service to proving clients peace of mind when something goes wrong. Christelle also chats about the consumer protection act with regards to going into contract and understanding all the terms and conditions with regards to payments and conditions to exit a contract.
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