On 5 November 2015 the FSB Enforcement Committee imposed a penalty of R100,000.00 against Discovery Insure (Discovery) after this matter was referred to the Committee by the Registrar of Short-Term Insurance (the Registrar).
During the period of September 2014 to January 2015, Discovery offered a premium waiver to members of the public who used the Gautrain, if they took up a short-term insurance product before 31 October 2014. Discovery offered free insurance cover for the month of January 2015 to new policyholders who joined them between October and November 2014 and who used the Gautrain for a defined number of times.
This premium waiver offered by Discovery was viewed by the Registrar as an inducement to take up short-term insurance policies in contravention of section 44 of the STIA that states:
44) Prohibitions on Inducements
Unless done in accordance with the rules made under section 55, no person shall provide, or offer to provide, directly or indirectly, any valuable consideration as an inducement to a person to enter into, continue, vary or cancel a short-term policy, other than a short-term reinsurance policy.
The Registrar stated that there are different interpretations of section 44 in the Industry and found that Discovery misinterpreted the relevant provision which resulted in the contravention. There was no conduct found which constituted an intentional breach of the provisions. The Registrar also found that he is not aware of any policyholders who were prejudiced by this contravention. The parties reached a settlement agreement as Discovery admitted to the contravention.
The Enforcement Committee therefore imposed the penalty of R100, 000.00 for the contravention of Section 44 of the Act.
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