Medical scheme protectionism is "irrational"

"Why would medical schemes, as a particular type of insurance deserve protection and no one else?" says Kirby.

He is the attorney who, four years ago, successfully represented insurance company Guardrisk in a Supreme Court of Appeal case against the Council for Medical Schemes.

At the time, in 2008, the Council was seeking to prevent Guardrisk from operating a gap cover product. The Council lost.

"Now the issue has resurfaced in the form of draft regulations that are being dealt with in a tearing hurry and for reasons that are not altogether clear," says Kirby.

He is referring to the draft regulations that the National Treasury has released as part of the raft of amendments proposed to regulations under the current Long-term and Short-terms Insurance Acts and to the definition of "business of a medical scheme" in a schedule to the Financial Services Laws General Amendment Bill.

If passed, the regulations could effectively prevent short-term insurance companies from selling gap cover policies.

"Inexplicably, the draft regulations are being rushed through," Kirby says.

Usually, the public is given 90 days in which to comment on draft regulations. This time, however, the period has been shortened to just 60 days.

In fact, the National Treasury initially wanted the public comment period to run for even less time - from 2 March 2012 to 23 April 2012. This was then extended to 2 May.

Kirby says there is no logic behind the draft regulations. "The regulator appears to think that there needs to be a sharper distinction between medical schemes and certain insurance products. Supposedly, the public is being duped into buying insurance products when they should buy medical scheme insurance. This is unfortunately based only on supposition and assumption, and is protectionist in the extreme."

Despite the short period of time given for public comment on the regulations, virtually the entire insurance industry has responded. "There is a groundswell of response because the issue fundamentally affects many South Africans," Kirby says. "Medical schemes are expensive; insurance policies are not."

The government's stance is even more incomprehensible in the light of its preparations to introduce national health insurance, he says. "With national health insurance, as we currently understand it, looming, one would have thought gap cover would be more attractive to government as a complementary financial instrument, but apparently not."

Kirby says it is not clear whether the National Treasury will publish revised regulations that incorporate public comment or go ahead with legislation. "Let's hope that the public's views will be taken into account in favour of a more rational and reasoned approach."