In terms of the new National Credit Act, insurance companies, under prescribed conditions, can access consumer credit information to assess applications for insurance. However, consumers must give their consent before an insurance company is allowed to pull their credit data from credit bureaux for insurance assessment purposes.
This is according to Angelo Haggiyannes, director of Auto & General Insurance.
“Although it has been common practice over the past four years for insurance providers to request credit data on an individual in order to assess an application for insurance, they haven’t, up to now, been required to get the applicant’s consent before doing so.
“Now, with the new National Credit Act, insurance companies — like credit providers — in certain circumstances must first get the person’s permission. They are also required to notify the applicant that their credit data will be part of the equation in assessing their insurance application, which could impact on their risk rating and ultimately affect their premium.
“It is important that consumers are aware of this,” explains Haggiyannes.
Randolph Samuel from Lucid Legal Services says that the National Credit Act, which in essence aims to create a non-discriminatory and fair credit market, has done much to generate a stronger awareness of consumers’ rights. This includes their right to access credit, their right to privacy and their right to choose.
The Act introduces the consumer’s right to access and challenge their own credit information held by a credit bureau, and to have any incorrect records corrected. They also have the right to be notified before any negative information is reported to the credit bureau.
“It has also formalised the protocols for accessing consumer credit information from credit bureaux, as well as the standards and procedures for submitting consumer credit information to them.
“While the National Credit Act is not intended to touch on insurers, they have been permitted to access credit data, which is obviously valuable in assessing risk. And, because they are allowed to access this information, they are required to submit credit information on policyholders, according to the same set standards as credit providers.
“In short, insurance companies are legally required to submit the payment profiles and information on their policyholders on a monthly basis. What this means is that any defaults on payment of premiums will end up being recorded with the credit bureau,” explains Samuel.
Following the enactment of the Act, credit providers will have to notify and get the consent of clients to add insurance premiums on to their credit agreements if they have defaulted on paying their insurance premiums.
“Up to now, the insurer would simply notify the finance institution concerned when the policyholder had not been paying the insurance premiums on a vehicle that had been financed, for example. The credit provider would then add the insurance premium on to the costs of the credit agreement.
“This is no longer allowed and the financier would need to get the consent of the client before adding the outstanding insurance premium to the costs of the credit agreement,” says Haggiyannes.
He says that the National Credit Act has provided clarity on the obligations of insurers in terms of accessing and submitting credit information.
This means that insurance companies have had to build rigour and control in terms of their information management and operational processes, which, he believes, is not a bad thing.
“Ultimately, the National Credit Act empowers consumers and entrenches their rights, and while it has created obligations for insurers, they are not overly arduous and Auto & General is committed to complying with all the relevant requirements,” he concludes.