Maree v C Booysen t/a NVM Beleggings & Versekeringsadviseurs

The respondent, Chris Booysen, operated as an insurance broker and consultant who had provided advisory services to the appellant, Mr P P Maree, for approximately 20 years. In July 2006, Booysen advised Maree to have his current Sanlam annuity policy 'paid up' and replace it with a Momentum Life policy. Maree initially followed this advice. On 17 July 2006, Sanlam sent Maree documentation setting out the impact of making the policy 'paid up'. After consulting with another insurance advisor at a local bank, Maree concluded he had been wrongly advised and that Booysen was motivated by commission. On 21 July 2006, Maree terminated his relationship with Booysen, and on 25 July 2006, he cancelled the Momentum Life policy within the statutory 'cooling-off' period. Booysen lost the commission he would have earned. Booysen sued Maree for R47,638.27, claiming commission based on a written agreement providing that if his commission was reclaimed by the insurer due to the policyholder's actions, the policyholder would remain responsible for the agreed compensation. The Magistrates' Court dismissed Booysen's claim, finding the agreement contravened section 49 of the Long-term Insurance Act 52 of 1998. The Free State High Court reversed this decision on appeal, upholding Booysen's claim.

• Whether an agreement between an insurance intermediary and a policyholder, entitling the intermediary to claim commission from the policyholder when the insurer does not pay commission due to cancellation within the statutory 'cooling-off' period, is enforceable
• Whether such an agreement contravenes section 49 of the Long-term Insurance Act 52 of 1998 and the regulations promulgated thereunder
• Whether such an agreement violates the Policy Protection Rules
• Whether a policyholder can waive statutory rights conferred under the Long-term Insurance Act

The appeal was upheld with costs. The order of the Free State High Court was set aside and substituted with: (a) The appeal is dismissed and the appellant is ordered to pay 80 per cent of the respondent's costs. The Magistrate's order was changed to: (a) The plaintiff's claim is dismissed with costs. (b) The defendant's counterclaim is dismissed with costs.

An agreement between an insurance intermediary and a policyholder that entitles the intermediary to claim commission from the policyholder when the insurer does not pay commission due to cancellation within the statutory 'cooling-off' period is unenforceable and void. Section 49 of the Long-term Insurance Act 52 of 1998, read with Regulation 3.2 and Regulation 3.8, prohibits any consideration being accepted by an independent intermediary for rendering services as intermediary other than commission contemplated in the regulations and paid in accordance with those regulations. Any agreement to provide consideration for rendering services as intermediary otherwise than in accordance with the regulations is void. Section 56 of the Act renders void any agreement by which a policyholder waives rights conferred by the Act. Enforcing such agreements would penalize consumers for exercising their statutory right to cancel policies within the 'cooling-off' period, which the legislature intended to protect.

The Court noted that the intermediary's grievance about not being compensated for effort expended in procuring the Momentum Life policy was exaggerated, and that intermediaries should be familiar with statutory provisions relating to restrictions on commission and consumers' rights to cancel policies within the 'cooling-off' period. The Court also observed that the stated purpose of the Policy Protection Rules is to ensure that intermediaries and insurers conduct their business honestly, fairly and with due care and diligence, and that several provisions of the Act are designed to protect consumers. The 'cooling-off' period is clearly designed to afford proper time to consider the full implications and impact of a policy without the consumer incurring any financial penalty. The Court noted that the golden thread running through the history of insurance legislation in South Africa is a commitment to consumer protection and protection against undesirable business practices.

This case is significant in South African insurance law as it definitively establishes that intermediaries cannot circumvent the statutory restrictions on commission by entering into private agreements with policyholders that require payment when statutory commission is not payable. It reinforces consumer protection measures under the Long-term Insurance Act, particularly the 'cooling-off' period, by ensuring consumers can exercise their statutory right to cancel policies within the prescribed period without financial penalty. The judgment clarifies that section 49 of the Act and the regulations thereunder apply to any agreement that would provide consideration to intermediaries for rendering services as intermediaries, whether from insurers or policyholders. It demonstrates the court's commitment to interpreting insurance legislation in favor of consumer protection and preventing undesirable business practices.