Strengthening Policyholder Protection: An Overview of the South African Long-term Insurance Amendment Bill

Introduction

The Long-term Insurance Amendment Bill (B17-2026) (“the Bill”) has recently been introduced in the National Assembly for consideration and proposes targeted amendments to section 62 of the Long-term Insurance Act 52 of 1998 (“LTIA”). A copy of the Bill and the Memorandum on the Objects of the Bill (“Memorandum”) can be accessed here.

The Bill is aimed at addressing concerns relating to policyholders who hold multiple funeral policies covering the same beneficiaries or life event and who may only become aware of limitations on benefits when a claim is submitted. 

If enacted, the Bill will impose additional disclosure obligations on life insurers underwriting life insurance policies in the funeral class of life insurance business as set out in Table 1 of Schedule 2 of the Insurance Act 2017, increased policyholder protection measures and potential sanctions for non-compliance by life insurers underwriting that class of insurance business.

The purpose of the Bill

The Memorandum states that the Bill seeks to amend the LTIA by requiring the Financial Sector Conduct Authority (“FSCA”) to prescribe rules to protect policyholders who hold multiple funeral policies in respect of the same beneficiaries. It would also require life insurers, within a prescribed period, to disclose to existing policyholders the consequences of holding multiple funeral policies for the same beneficiaries. 

According to the Memorandum, the proposed amendments are intended to address circumstances where policyholders continue paying premiums on multiple funeral policies without fully understanding the costs, benefit limitations and practical implications of overlapping cover. The concern identified in the Memorandum is that policyholders may only discover such limitations when a claim is submitted, potentially resulting in financial prejudice and consumer dissatisfaction. This objective is reflected in the proposed amendments, which require the FSCA to prescribe rules aimed at “protecting policyholders holding multiple funeral policies in respect of the same beneficiaries”.

The Bill therefore seeks to promote greater transparency and informed decision-making by ensuring that policyholders are made aware of the costs, benefits and limitations associated with multiple funeral policies before a claim event arises.

Key provisions of the Bill

Identification of multiple funeral policies

One of the most significant features of the Bill is the requirement that life insurers underwriting funeral policies implement systems to determine whether a prospective policyholder’s beneficiary is already covered under another funeral policy issued by the same insurer.

More specifically, the Bill contemplates rules requiring insurers to determine whether “the beneficiary under a funeral policy application is already a beneficiary under another funeral policy issued by the same insurer”.

This represents a more proactive approach to consumer protection than is currently reflected in the LTIA, as life insurers will be expected to identify potential overlaps within their own books of business rather than dealing with the consequences only when claims arise.

It is noteworthy that the Bill appears to be limited to situations where multiple funeral policies are issued by the same life insurer. The proposed amendments do not currently address circumstances where a policyholder or beneficiary holds funeral policies with multiple life insurers. Whether the Bill will ultimately achieve its stated policy objectives in the absence of a broader industry-wide mechanism for identifying overlapping funeral cover therefore remains an open question.

Enhanced disclosure obligations

Where multiple policies are identified, the life insurer will be required, within twelve months of the enactment of the Bill, to provide existing policyholders with written disclosure of (i) the associated costs; (ii) the maximum benefits payable; and (iii) any limitations on those benefits. Policyholders then have a period of 31 days from receipt of such information within which to cancel any of their existing funeral policies. Should the life insurer fail to comply with these disclosure obligations, the affected policyholder is entitled to cancel the existing funeral policies immediately, and the life insurer may be obliged to refund premiums paid, subject to the applicable statutory limits.

Notably, these obligations are not limited to new business. The proposed amendments therefore create both ongoing disclosure obligations for future policies and retrospective disclosure obligations in respect of existing policies.

Cancellation rights

Following receipt of the prescribed disclosures, policyholders will have a period of 31 days within which to cancel any funeral policy held in respect of the same life event.

The cancellation right appears to be intended to provide policyholders with an opportunity to reassess their cover once they have been provided with sufficient information regarding overlapping benefits and associated costs.

The Bill further seeks to ensure that policyholders are not prejudiced merely because they failed to disclose the existence of another funeral policy when applying for cover.

Refunds and sanctions for non-compliance

The Bill introduces potentially significant consequences where life insurers fail to comply with the prescribed rules or disclosure obligations.

Should a life insurer fail to provide the required disclosures or otherwise fail to comply with the applicable requirements, a policyholder may be entitled to cancel the affected funeral policy immediately.

In certain circumstances, the life insurer may also be required to refund premiums or monies paid by the policyholder, subject to the limitations contained in the legislation.

These provisions have the potential to create both financial and operational consequences for life insurers and underscore the importance of implementing appropriate compliance measures should the Bill be enacted.

The implications of the Bill for life insurers underwriting funeral policies

For life insurers, the Bill introduces heightened regulatory obligations. Life insurers will be required to implement systems capable of detecting multiple policies issued by them for the same beneficiaries. Depending on the size and complexity of a life insurer’s funeral book, this may require substantial enhancements to policy administration systems, data management processes and beneficiary verification procedures.

Life insurers will also need to develop processes to ensure that the required disclosures are made both at the point of sale and in respect of existing policyholders within the prescribed implementation period.

The proposed refund mechanism may further increase regulatory and financial exposure where life insurers are unable to demonstrate compliance with the disclosure requirements.

Implications of the Bill for policyholders

From the perspective of policyholders, the Bill enhances transparency and promotes informed decision-making by requiring life insurers to provide clear disclosure of costs, benefit limits and potential overlaps where multiple funeral policies exist. 

This seeks to reduce the risk of financial prejudice, particularly in circumstances where policyholders may inadvertently continue paying premiums on funeral policies that ultimately offer limited or no additional benefit at the claims stage.

A more proactive regulatory approach

More broadly, the Bill signals a shift towards a more proactive, consumer-centric regulatory approach. It aligns with principles of fairness and transparency in the insurance sector and requires life insurers to actively safeguard policyholder interests before issues arise at a claims stage. 

The Bill is currently progressing through the parliamentary process and may still be amended before enactment. Nevertheless, it reflects the legislature’s intention to enhance policyholder protection in the funeral insurance market and to place greater emphasis on transparency, fairness and informed consumer choice.

For more information on the Long-term Insurance Amendment Bill and its practical implications for insurers and policyholders, please contact Clyde & Co’s Corporate & Regulatory Team.