| (1) | Subject to subsection (5), if a party to a contract in terms of which money is loaned, goods are leased or credit is granted, requires, whether as a condition thereof or otherwise, that a short-term policy or its policy benefits be made available and used for the purpose of protecting the interests of a creditor, the person who is so required to, make that policy or those policy benefits available shall be entitled, and shall be given prior written notification of that entitlement to a free choice— |
| (a) | as to whether he or she wishes to enter into a new policy and make it available for that purpose, or wishes to make available an existing policy of the appropriate value for that purpose, or wishes to utilise a combination of those options; and |
| (b) | if a new policy is to be entered into— |
| (ii) | as to whether or not the value of the policy benefits to be provided thereunder, when taken in the aggregate with the value of the policy benefits provided under any other policy which is also to be made available and used for that purpose, shall exceed the value of the interest of the creditor; and |
| (c) | if an existing policy is to be made available— |
| (i) | as to the person (if any) who is to render services as intermediary in connection with the transaction; and |
| (ii) | as to whether or not a variation of the policy required for that purpose shall be such as to cause the value of the policy benefits to be provided thereunder, when taken in the aggregate with the value of the policy benefits provided under any other policy which is also to be made available and used for that purpose, to exceed the value of the interests of the creditor. |
| (2) | The provisions of subsection (1) shall be deemed not to have been complied with unless the policyholder whose policy is to be made available has confirmed in writing, before the policy is used for the purpose of protecting the interests of the creditor concerned, that he or she— |
| (a) | was given prior written notification of his or her entitlement to the freedom of choice referred to in that subsection; |
| (b) | exercised that freedom of choice; |
| (c) | was not subject to any coercion or inducement as to the manner in which he or she exercised that freedom of choice. |
| (3) | Any policy benefits that may be provided under a policy referred to in subsection (1) shall accrue and be paid to a creditor only to the value of the interests of the creditor in the subject-matter of the policy, and any surplus shall accrue and be paid to the policyholder whose policy is used for the protection of the interests of the creditor concerned. |
| (4) | If the provisions of subsections (1) and (3) are not complied with, the security provided by the policy made available and used for the purpose shall be void and the policy benefits shall be provided to the person who made it available. |
| (a) | Subsection (1) shall not apply in the case of a short-term policy which is required to be made available in relation to a contract in terms of which money is loaned upon the security of the mortgage of immovable property. |
| (b) | In a case where a new policy is to be entered into, the premiums payable under that policy shall be reasonable in relation to the premiums generally charged by insurers under similar policies. |
| (c) | A certificate by the Authority that he or she is satisfied that the premiums concerned are reasonable, shall for the purposes of this subsection be sufficient proof of the reasonableness of such premiums. |
| (6) | This section does not apply if the short-term policy or its policy benefits as contemplated in subsection (1), is made available for the purpose of protecting the interests of a creditor under a credit agreement to which the National Credit Act, 2005, applies. |
[Section 43(6) inserted by section 172(2) of Act No. 34 of 2005]
