Litigation flash points and other areas of legal concern in the Insurance Act of Malawi

• Pages: 35-53
• DOI: 10.10520/EJC123682
• Published date: 01 January 2011
• Author: Kalekeni Kaphale
• Date: 01 January 2011

LITIGATION FLASH POINTS AND OTHER

AREAS OF LEGAL CONCERN IN THE

INSURANCE ACT OF MALAWI

Kalekeni Kaphale*

Abstract

This article critically analyses the newly enacted Insurance Act whose princi-

pal object is to make provision for the enhancement of the safety, soundness

and prudent management of insurers and other persons involved in the insur-

ance industry in Malawi. The Act introduces many changes to the old

insurance law in Malawi. In particular, it has substantially replicated the

emerging trend and practice in this field in Eastern and Southern Africa.

However, the Act contains some important oversights and raises a number of

legal concerns. For example, the Registrar of Financial Institutions (Registrar)

has been given wide discretion to make decisions concerning the insurance

business. It is argued that there are no good reasons why the Governor of the

Reserve Bank of Malawi should be the Registrar. Crucially, the Act is dedi-

cated to the regulation of the insurance business without paying specific

attention to the rights of the insured. However, some of the provisions of the

old Act that have been left out were crucial to the protection of the interests of

assured persons. It is hoped that the issues raised in this article will help all

stakeholders in improving the Act, so that the insurance sector can be enabled

to play a more meaningful role in the Malawian economy.

I INTRODUCTION

On 9 January 2010, the insurance industry in Malawi woke up to a newly

enacted Insurance Act1(the Act) which replaces the old one enacted in 1957

AREAS OF LEGAL CONCERN IN THE INSURANCE ACT OF MALAWI 35

LLB (Hons) (University of Malawi), currently in private law practice in Malawi.

*

1Act No 9 of 2010. The Act deals with an aspect of financial services law, insurers being one of the

financial institutions recognised by the Financial Services Act No 26 of 2010 (FSA). Although its

enactment was presaged by the FSA, the Act itself was assented to by the President earlier than the

FSA.

(the Old Act).2This was very welcome news to all players in the insurance in-

dustry as the Act seemed well-turned to address all possible challenges facing

that sector of the economy in the 21st Century. The principal object of the Act is

to make provision for the enhancement of the safety, soundness and prudent

management of insurers and other persons involved in the insurance industry

in Malawi, with the aim of protecting the interests of insurance policyholders

and ensuring the highest standard of conduct of business of insurance compa-

nies, brokers and agents.3

However, the Act is not without some ‘loose-ends’4and concerns. There

are areas that are likely to lead to some [(un)necessary] litigation and which

could be fine-tuned. Some players in the insurance industry, for example the

insured, are not adequately covered by the Act, thereby creating the impres-

sion that the Act is aimed at addressing the concerns of the insurer only. The

Act also raises constitutional issues that need to be understood by all stake-

holders in the industry. This article seeks to highlight such issues and, where

possible, recommends proposals for remedial action. It will begin by giving an

overview of the provisions of the Act. Here it will become clear that the Act is

more of a regulatory statute addressing the insurer, and not the insured, than

of a law that seeks to change the current common law regulating insurance

contracts in Malawi. Thereafter, the article will identify the constitutional

rights that are implicated by the Act. It will then shift to an analysis of the vari-

ous provisions of the Act that raise legal concerns, which, if not attended to,

may soon give rise to litigation. In doing all this, the article will draw on similar

insurance regulatory statutes from Eastern and Southern Africa. The conclu-

sion will then argue for an immediate re-think of the Act in order to resolve

and rectify the identified concerns.

II AN OVERVIEW OF THE ACT

Part I of the Act is very brief and deals with preliminary matters. It con-

tains the interpretation section and lays down the object of the Act. Under

section 4, it is provided that the Act shall apply to the insurance industry in ad-

dition to the Financial Services Act (FSA)5and the provisions of the FSA

relating to licensing and registration applications shall apply mutatis mutandis

36 (2011) MLJ VOL.5, ISSUE 1

2Insurance Act, Cap 47:01 of the Laws of Malawi.

3Section 3 of the Act.

4Quite apart from the incomplete marginal notes that litter it.

5Note 1 above.