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JD Group Told to Rethink How It Sells Insurance

JD Group, the company behind popular furniture and electronics stores, just got into trouble about how it offers insurance on its credit deals.

The National Credit Regulator (NCR) took issue with the group’s bundled credit insurance (which includes retrenchment and disability cover) being sold to people like pensioners or those already disabled, who simply can’t benefit from it.

A Long Battle Between the NCR and JDG

This case has been going on for a very long time and only recently has been resolved.

Back in 2019, The NCR first took the matter to the National Consumer Tribunal (NCT) but after looking things over they dismissed the case. They felt that with the right level of disclosure and since consumers do have the choice to make use of their own insurance instead, there was not a serious disadvantage to consumers.

Not convinced, the NCR decided to take the matter further. They appealed, and finally after many years the High Court has ruled that JD Group broke several parts of the National Credit Act, especially section 106(2), which says insurance must be reasonable and make sense for the consumer.

Cross-Subsidising

JD Group defended the insurance as being optional, affordable, and part of a group scheme that spreads the cost to everyone thus keeping the rates reasonable.

They said that cross-subsidising (where some people benefit more than others) is a normal part of how insurance works. But the High Court found that offering retrenchment cover to someone who isn’t working, or disability cover to someone who is already disabled, is not only pointless but also unfair.

The ruling indicates that even if the price is low, the court does not feel it is justified to charge someone for a benefit they cannot ever use. Which also touches on sections 90(1) and 90(2) of the Act, which protect consumers from unfair contract terms.

The judge pointed out that consumers are entitled to expect that, if they’re paying for insurance, they should be able to claim when needed.

Reasonable Costs For Real Value

Section 101(1)(a) of the NCA makes it clear that every cost charged to a consumer must relate to something that offers real value.

In this case, people like pensioners and social grant recipients were paying for something they’d never qualify to claim and, the court said, that just isn’t right. The court also stressed that vulnerable consumers deserve protection from practices like this.

‘people like pensioners and social grant recipients were paying for something they’d never qualify to claim’

The matter will now go back to the NCT to decide what happens next. JD Group will likely need to change how it sells and structures its credit insurance going forward.

This ruling is a strong reminder that all extra costs on credit (including credit life insurance) must be reasonable, fair, and appropriate for the person paying. Consumers should never be left paying for something they can’t actually use.

Often when consumers enter debt review, they are encouraged by their Debt Counsellor to look at their credit life products attached to their debts and make adjustments if beneficial.