The 2020 LT Ombud annual report notes an increase in complaints regarding accidental death policies.
“These policies are generally sold by means of direct marketing, without advice*. Consumers buying life policies assume that they will be covered, whether the insured event is as a result of accidental or natural causes. If the sales process is not conducted in such a way that it is explained in easy-to-understand terms that the policy only provides accidental cover, and what that means, it can lead to disappointed expectations at claim stage.”
One case study discussed a complaint about a declined claim in which the beneficiary argued that death due to the COVID-19 virus was accidental. In the policy, an accident was defined as:
‘’an uncertain future event which is caused solely and directly by violent, accidental, physical and visible means and independently of any other cause’’.
She argued that the virus was not expected, so it was uncertain; contracting it was accidental; and the death it caused was violent because the deceased was unable to breathe.
The Ombud pointed out the following:
‘’Every element of the definition must be satisfied.
You are correct that the COVID-19 virus was unexpected and it causes a terrible death when somebody dies of not being able to breathe. We accept that contracting the virus was unexpected and we accept that your late husband did not intentionally contract the virus. These are two of the elements of an accident but not the only two.
The Ombud pointed out that the contracting of the virus, i.e. the cause of death, must also be violent and accidental and external and physical and visible. The effect of the COVID-19 virus on the patient’s body is not the determining factor.
To use an obvious example, a car crash is an accidental event because the event itself is uncertain, violent, accidental, external, physical and visible, not only the damage caused to a person’s body or the death caused by the accident.
“I also could not find any South African or English case law which supports the view that death as a result of contracting a disease (such as the COVID-19 virus) is an accident for insurance purposes. The legal textbooks that I consulted also do not provide support for such a position. The conclusion I draw from these textbooks is that contracting a disease is generally not regarded to be an accident.”
*”Without advice” refers to a script which is supposed to convey information to a client, who then decides whether to purchase the product or not. The problem with this approach is that there are no specific guidelines, and no checks and balances on the content of the script. Problems will only surface after complaints. An additional problem is that these products are normally sold in the market segment where financial literacy is not abundant, neither with the caller, nor the client. This is also the sector where most miss-selling takes place.