An insurer was ordered to pay a funeral benefit after its financial adviser recorded a policyholder’s godfather as her father, despite knowing the true nature of their relationship.
The case, highlighted in the National Financial Ombud Scheme’s 2025 annual report, shows the consequences when an adviser’s representations at the application stage conflict with the policy terms later relied on by the insurer.
The policyholder applied for an insurance policy with Metropolitan Life and listed her mother’s former boyfriend, Mr X, as a “father” under the policy.
Following Mr X’s death, the policyholder submitted a funeral benefit claim. The insurer declined the claim on the grounds that there was no insurable interest between the policyholder and Mr X, and the policy did not provide cover for a godfather.
The insurer relied on the following contractual provision defining who qualifies to be covered as a parent under the policy:
“You can choose to insure up to four parents, regardless of their gender, under this plan. Your parents are your: legally recognised parents; step-parents; legal guardians; or parents-in-law.”
The policyholder said that, when she applied for the policy, she told the financial adviser, who was a tied agent of Metropolitan, that Mr X was her godfather and her mother’s boyfriend.
The insurer submitted a statement from the adviser confirming that the policyholder had told him the true nature of the relationship at the application stage.
Adviser’s representation creates legitimate expectation
The adjudicators considered the central issue to be the legitimate expectation created by the financial adviser’s conduct.
Despite knowing the true relationship between the policyholder and Mr X, the adviser issued the policy and recorded Mr X as the policyholder’s father, thereby affording him cover under that category. The policyholder relied on this representation when entering
The cover amount was also considered.
The initial cover in respect of Mr X was R20 000, and the waiting period applicable to this amount expired on 31 December 2023. The cover was subsequently increased to R30 000 in February 2024.
Under the policy, amendments such as an increase in cover were subject to a new six-month waiting period. The additional R10 000 was therefore still subject to the waiting period when Mr X died in March 2024 and was not payable.
The adjudicators therefore directed the insurer to pay the original R20 000 cover, for which the waiting period had already expired.
The insurer did not accept the recommendation.
It said the policy contract and accompanying user guide provided to the policyholder after the policy was issued did not provide cover for a godfather. Although it acknowledged that the financial adviser had provided inaccurate information at the application stage, it argued that the policyholder was responsible for checking the policy documents and raising any discrepancy with the insurer.
The insurer offered R2 500 ex gratia as compensation for the poor service resulting from the adviser’s inaccurate information.
The matter was referred to the Escalation Committee.
The adjudicators rejected the insurer’s argument that the policyholder should have identified the discrepancy by checking the policy documents.
They found that the insurer was bound by what the policyholder was told at the application stage, because the contract had been concluded on the strength of the adviser’s material misrepresentation that Mr X qualified for cover, despite being the policyholder’s godfather.
The adjudicators said that, having materially misrepresented the situation, a heavy burden rested on the insurer to draw the policyholder’s attention to the correct information. The policyholder was entitled to assume that the written insurance contract substantially reflected what she had been told.
The meeting also applied the principle that a party cannot take advantage of its own default to the loss or injury of another. It found that the insurer was effectively seeking to take advantage of its adviser’s material misrepresentation to the policyholder’s detriment.
The recommendation was confirmed as the NFO’s final ruling, and the insurer was directed to pay the R20 000 cover amount. The insurer elected to abide by the final ruling and paid the benefit to the policyholder.
