Beware of the insurance rip-off

City Press was recently sent a copy of a loan agreement between a customer and micro-lender Letsatsi Finance. In this agreement Letsatsi Finance lent the customer R8000 and included insurance on the loan at a monthly cost of R320. According to the loan agreement this insurance was taken through Safrican Insurance.

Over the period of the loan the insurance premium will amount to R4160 – just over half the value of the loan. This premium equates to a rate of R40 per R1000 of cover which is ten times the maximum going rate.

The interest and fees on the loan come to R3290, less than the premium on the insurance. In total the R8000 loan will cost the client R15 450 by the time he is finished paying it off.

When City Press contacted Safrican Insurance to confirm the rate, we were informed that “we have no records of the lender Letsatsi Finance and Loan (Pty) Ltd as one of our schemes neither do we have the borrower as a client on our system”. This would suggest that the micro-lender fraudulently charged the client for an insurance policy he never owned.

City Press contacted Letsatsi Finance with this information but at time of going to print the company had not responded to confirm or deny this allegation and further investigation needs to take place via the National Credit Regulator.

These practices highlight the need for consumers to fully understand what they are signing and to demand all documentation. Always make sure you have a copy of the insurance policy issued by the insurer to confirm that the policy is in fact in place. Also ensure that the premium stated on the loan agreement matches that of the insurance policy and understand the terms and conditions as to when the policy will pay out. Read our article on credit life insurance to understand your rights

This article by Maya Fisher-French was first published in City Press.

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