LML4805
EXAM PACK
,LML4805 - INSURANCE LAW
MAY/JUNE 2026
EXAM ANSWERS
QUESTION 1
1(a)
Mr Dlamini has professional liability insurance which protects him against liability that he
may incur towards patients in the course of his professional activities. This is
professional indemnity or professional liability insurance. It is a form of short-term
insurance because the insurer undertakes to indemnify the insured against a specified
liability or loss arising from the insured's professional activities.
Indemnity or non-indemnity insurance
The policy is indemnity insurance. Indemnity insurance is intended to compensate the
insured for a patrimonial loss actually suffered. Mr Dlamini is not entitled to receive a
predetermined amount merely because a specified event occurs. Rather, Pharm Cover
Limited will compensate him for the amount for which he becomes legally liable, subject
to the terms, conditions and limits of the policy.
The purpose is therefore to place the insured, insofar as money can do so, in the
financial position in which he would have been had the insured liability not arisen. This
is consistent with the principle of indemnity applicable to indemnity insurance.
First-party or third-party insurance
This is third-party insurance.
First-party insurance protects the insured against loss suffered directly by the insured,
for example insurance covering the insured's own vehicle against accidental damage.
,Third-party insurance, in contrast, protects the insured against liability towards another
person.
Here, the patients are third parties who may suffer harm as a result of Mr Dlamini's
professional conduct. The policy does not primarily insure the patient's property or
interests. Instead, it protects Mr Dlamini against the financial consequences of claims
made against him by his patients.
Valued or unvalued policy
The policy is an unvalued policy.
In an unvalued policy, the amount payable is not fixed merely by the occurrence of the
insured event. The amount of the insured's actual loss or liability must be established,
subject to the policy limit. A professional liability policy normally operates in this manner
because the insurer indemnifies the insured for the amount of his proven legal liability.
This differs from a valued policy, particularly in non-indemnity insurance, where the
parties agree in advance on the amount payable when the insured event occurs.
Private or social insurance
The policy is private insurance.
Private insurance arises from a voluntary contractual relationship between an individual
and a private insurer. Mr Dlamini voluntarily obtains cover from Pharm Cover Limited
and pays, or undertakes to pay, a premium in exchange for the insurer's undertaking to
provide cover.
Social insurance, by contrast, is generally established through legislation and forms part
of a broader system of social security, with participation and benefits regulated by
statute.
Conclusion
, The policy is therefore professional liability insurance; indemnity insurance; third-
party insurance; unvalued insurance; and private insurance.
1(b)
The statement is correct. South African insurance law has undergone substantial
statutory reform since 2017. Insurance law is no longer derived only from common law
and older insurance statutes; legislation, regulations, regulatory standards and
policyholder-protection rules have become increasingly important.
1. Financial Sector Regulation Act 9 of 2017
The Financial Sector Regulation Act 9 of 2017 (FSR Act) introduced the "Twin
Peaks" model of financial regulation. It established, among other things, the Prudential
Authority and the Financial Sector Conduct Authority (FSCA) and provided a
framework for the regulation and supervision of financial institutions and financial
products. Importantly for insurance law, the Act amended and interacted with both the
Long-term Insurance Act 52 of 1998 and the Short-term Insurance Act 53 of 1998.
The Act is therefore an important source of insurance law because insurers operate
within the broader financial regulatory system created by it.
2. Insurance Act 18 of 2017
The Insurance Act 18 of 2017 is perhaps the most significant modern statutory
development in South African insurance law. It established a new prudential framework
for the regulation and supervision of insurance business and insurance groups. It also
introduced a dedicated framework for microinsurance, aimed partly at improving
financial inclusion. The Act replaced substantial parts of the previous prudential
framework contained in the Long-term and Short-term Insurance Acts.
The Act commenced on 1 July 2018 and consequently became an important
component of the modern regulatory framework governing insurers.
EXAM PACK
,LML4805 - INSURANCE LAW
MAY/JUNE 2026
EXAM ANSWERS
QUESTION 1
1(a)
Mr Dlamini has professional liability insurance which protects him against liability that he
may incur towards patients in the course of his professional activities. This is
professional indemnity or professional liability insurance. It is a form of short-term
insurance because the insurer undertakes to indemnify the insured against a specified
liability or loss arising from the insured's professional activities.
Indemnity or non-indemnity insurance
The policy is indemnity insurance. Indemnity insurance is intended to compensate the
insured for a patrimonial loss actually suffered. Mr Dlamini is not entitled to receive a
predetermined amount merely because a specified event occurs. Rather, Pharm Cover
Limited will compensate him for the amount for which he becomes legally liable, subject
to the terms, conditions and limits of the policy.
The purpose is therefore to place the insured, insofar as money can do so, in the
financial position in which he would have been had the insured liability not arisen. This
is consistent with the principle of indemnity applicable to indemnity insurance.
First-party or third-party insurance
This is third-party insurance.
First-party insurance protects the insured against loss suffered directly by the insured,
for example insurance covering the insured's own vehicle against accidental damage.
,Third-party insurance, in contrast, protects the insured against liability towards another
person.
Here, the patients are third parties who may suffer harm as a result of Mr Dlamini's
professional conduct. The policy does not primarily insure the patient's property or
interests. Instead, it protects Mr Dlamini against the financial consequences of claims
made against him by his patients.
Valued or unvalued policy
The policy is an unvalued policy.
In an unvalued policy, the amount payable is not fixed merely by the occurrence of the
insured event. The amount of the insured's actual loss or liability must be established,
subject to the policy limit. A professional liability policy normally operates in this manner
because the insurer indemnifies the insured for the amount of his proven legal liability.
This differs from a valued policy, particularly in non-indemnity insurance, where the
parties agree in advance on the amount payable when the insured event occurs.
Private or social insurance
The policy is private insurance.
Private insurance arises from a voluntary contractual relationship between an individual
and a private insurer. Mr Dlamini voluntarily obtains cover from Pharm Cover Limited
and pays, or undertakes to pay, a premium in exchange for the insurer's undertaking to
provide cover.
Social insurance, by contrast, is generally established through legislation and forms part
of a broader system of social security, with participation and benefits regulated by
statute.
Conclusion
, The policy is therefore professional liability insurance; indemnity insurance; third-
party insurance; unvalued insurance; and private insurance.
1(b)
The statement is correct. South African insurance law has undergone substantial
statutory reform since 2017. Insurance law is no longer derived only from common law
and older insurance statutes; legislation, regulations, regulatory standards and
policyholder-protection rules have become increasingly important.
1. Financial Sector Regulation Act 9 of 2017
The Financial Sector Regulation Act 9 of 2017 (FSR Act) introduced the "Twin
Peaks" model of financial regulation. It established, among other things, the Prudential
Authority and the Financial Sector Conduct Authority (FSCA) and provided a
framework for the regulation and supervision of financial institutions and financial
products. Importantly for insurance law, the Act amended and interacted with both the
Long-term Insurance Act 52 of 1998 and the Short-term Insurance Act 53 of 1998.
The Act is therefore an important source of insurance law because insurers operate
within the broader financial regulatory system created by it.
2. Insurance Act 18 of 2017
The Insurance Act 18 of 2017 is perhaps the most significant modern statutory
development in South African insurance law. It established a new prudential framework
for the regulation and supervision of insurance business and insurance groups. It also
introduced a dedicated framework for microinsurance, aimed partly at improving
financial inclusion. The Act replaced substantial parts of the previous prudential
framework contained in the Long-term and Short-term Insurance Acts.
The Act commenced on 1 July 2018 and consequently became an important
component of the modern regulatory framework governing insurers.
