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The Insurance Act includes useful provisions permitting ancillary benefits in a non-life policy known as rider benefits. A rider benefit is an additional insurance obligation under a life insurance policy or a non-life insurance policy which is ancillary to the primary insurance obligations assumed under the policy.
An insurer that is licensed to conduct a specific class or sub-class of insurance business may provide the rider benefits prescribed for that class or sub-class of insurance business (s 25(3)). It is accounted for under the primary class.
Where the word “prescribed” is used in the Insurance Act it refers to what is prescribed in a Prudential Standard. The relevant Prudential Standard is GOI 7 which sets out miscellaneous regulatory requirements for insurers. Section 8.3 deals with non-life rider benefits.
A non-life insurer may add to the policy benefits which it is licensed to provide, rider benefits relating to any of the classes or sub-classes of non-life insurance business for which it is not licensed as long as the benefits are ancillary to the primary insurance obligations assumed under the policy.
There are three possible ways in which to provide rider benefits:
The provision made for rider benefits is constructive and fair because it allows insurers to sweeten the offering to policyholders in ways which are not uncommon in the world of insurance.
Patrick Bracher Norton Rose Fulbright South Africa February 2024