Trade and Industry Minister, Dr Rob Davies, has published the draft Credit Life Insurance Regulations for public comment.

“We have issued these draft Credit Life Insurance Regulations to curb the abuse of credit life insurance,” said Minister Davies on Sunday.

The notice on the draft regulations was published on 13 November.

Up until now, credit insurance has remained unregulated by the National Credit Act, which has resulted in numerous credit providers abusing the system, said the Minister.

Credit insurance refers to an insurance premium charged on loans to compensate for those loans being written off if the debtor becomes unable to repay the loan, through no fault on his or her part, such as death and loss of employment.

Minister Davies said the proposed premium caps will address the excessive payments that consumers have been charged as the industry has been unregulated.

“In the draft regulations, we proposed a cap of R4.50 per month per R1 000 for credit facilities, unsecured credit transactions, short-term credit transactions and other credit agreements.

“A cap of R2 per month per R1 000 is being proposed for mortgage agreements and developmental credit agreements respectively. These caps will address the excessive over-charging on credit insurance premiums that has persisted in the industry where no caps were previously in place,” said Minister Davies.

He also indicated that the draft regulations aim to prevent credit insurers from selling inappropriate cover when credit is provided and circumventing caps on interest rates.

Other abuses in credit insurance include the sale of insurance to consumers who do not qualify for one or have no need for the insurance, such as the sale of job-loss insurance to pensioners and unemployed customers.

“In terms of the draft regulations, this practise is explicitly prohibited and credit providers are obliged to prove that they do not conform to this form of practise,” the Minister said.

He said credit providers are also prohibited from imposing a standardised insurance fee on all consumers. The insurance premium additional to their repayments has to reflect actual risk being compensated for, such as the consumer’s individual risk profile or the risk profile to which the consumer belongs.

Where credit providers actually charge the maximum premium, they may be required to demonstrate that they are differentiating between consumers’ risk profiles as required.

The Department of Trade and Industry (dti) will hold consultative meetings with stakeholders in order to clarify some of the issues.

Industry role players and interested persons have until 6 January 2016 to make written submissions and proposals to the dti.

Submissions received during this commentary period will be taken into account and will enable Minister Davies to come up with a final determination.

The proposals can be viewed on: