The Ombudsman for Long-Term Insurance has stepped in to rectify a life assurer’s unfair interest charges on a loan taken out from a life policy. At the crux of the argument between the life assurer and the ombud was whether the “in duplum rule” — which puts the brakes on the amount of interest that can accumulate on a debt — applies to a policy loan and how it must be applied. In a final determination against Momentum Life, ombud Judge Ron McLaren found that the in duplum rule applies to any debt that arises out of a loan or advance granted after January 1 1999, when the Long-Term Insurance Act came into operation and that the rule is not limited to interest that is in arrears as argued by the life assurer. Mr W, a policyholder, borrowed R5,000 against his life policy in 1999 from then Southern Life Insurance, which later merged with Momentum Life. He never made repayments on the loan on the assumption that his monthly premium would be adjusted to incorporate the monthly loan repaym...

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