Debtfree Magazine July 2017

Raising The Bar For
Credit Life Insurance
When consumers take on credit, credit providers insist they
take a type of insurance (either their own or provided by the
consumer) to cover the debt, in case of the consumer dying or
losing their job. This is commonly called ‘credit life’ insurance.
Most consumers sign for it and don’t really know what it is or
how it works.
A while back, some pretty significant changes were made by the DTI to the
regulations about credit life insurance. As is common with amendments and
new regulations, some time is given for all industry players to get ready and
make adjustments. Now these big changes are coming into effect on the 1st of
August 2017. The idea of the new regulations was to stop credit providers milking
consumers with high fees and with little disclosure on how to claim. Traditionally
this type of insurance has had a very low claim rate even though every credit user
has been forced to take this type of cover. It has been the secrete cash cow of
the credit industry for many years. The new regulations are going to force credit
providers and their insurance partners to lower their fees significantly.
New Maximum Credit Life Insurance Rates As Of August
The new regulations place minimum requirements and maximum caps on the
fees that can be charged. Insurers can now only charge a maximum of R4.50 per
R1000 of unsecured credit taken whereas before there were reports of as much
as R11/ R1000 or more being charged by some. As usual, consumers should
expect their credit providers to try stick to the maximum allowable rates to try to
make as much money off them as possible.