The new Consumer Protection Act (CPA) sets a baseline and insurers would do well to ensure that they comply with the Act or potentially face penalties, Webber Wentzel said on Monday.

In a statement Max Ebrahim, senior associate at Webber Wentzel's Cape Town office, suggested that insurers closely examine the provisions of their documents and practices and weigh them up in terms of the relevant provisions of the CPA.

He added that they should do this sooner rather than later.

"Not only is this highly technical but the comparison may often be a matter of interpretation; ambiguities need to be addressed and resolved ahead of the Act coming into operation."

He said the early effective date - when all the administrative provisions of the Act came into force - was April 24 this year, with the general effective date being October 24 2010.

"Insurers should also look closely at the implications of the CPA's dramatic new product liability provisions which create a regime of strict liability, or liability without negligence.

"This liability is imposed irrespective of whether or not the supplier is negligent, and is joint and several," Ebrahim added.

The harm for which the supplier would be held liable included death, injury, illness, loss of or physical damage to property and any economic loss arising from any harm caused by any unsafe goods, or any failure, defect or hazard in any goods, or inadequate warnings or instructions relating to any hazard associated with any goods.

The same liability was also imposed on any person who installed or provided access to such goods, Ebrahim noted. "Needless to say, the increased potential product liability exposure for suppliers could impact heavily on insurers.

"This will therefore require careful underwriting of this risk," Ebrahim said.

There was also uncertainty about the relationship between the CPA and the Financial Advisory and Intermediary Services Act (FAIS).

"While the CPA does formally exclude advice regulated under FAIS, the CPA will nonetheless trump FAIS if it offers greater protection as far as, say, services such as marketing and advertising is concerned."

Assuming that the Long and Short Term Insurances Acts were not amended, failure to comply with the provisions of the CPA could open insurers up to heavy administrative penalties of up to 10 percent of the company's turnover of the previous year, Ebrahim added. - Sapa

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