Contradictory Interpretations

The latest issue of the Short-term “Ombudsman’s Briefcase” contains an interesting case which highlights again the difficulty of complying with varying interpretations by overseeing bodies.

We recently commented on two FAIS Ombud determinations where the Short-term Ombud agreed with the insurer, but referred the matter to the FAIS Ombud in view of possible action against the adviser concerned.

This particular case may well have resulted in the same outcome, yet it appears that, in the view of the Short-term Ombud, the insured also has to accept liability for the outcome.

The insured lodged a claim with his insurer for an accident which had occurred in February 2015. His motor vehicle was assessed and deemed to be uneconomical to repair. His insurer settled the claim but Mr. B. disputed the settlement amount as (according to him) it was not based on the actual retail value of the vehicle as at the date of the loss. As the insurer was not prepared to revise the settlement amount, Mr. B. lodged a complaint with the Office requesting that the insurer’s calculation of the settlement amount be investigated.

Mr. B. felt that the claim had been settled incorrectly as the retail value of the vehicle as at the date of loss was R78 400 (as per the Auto Dealer’s Guide). His insurer’s offer was R51 238, being in full and final settlement of the claim. However, Mr. B. was not prepared to accept this amount. He also maintained that despite the proposal form listing the incorrect sum insured he had not completed the proposal form himself. He further submitted that he should have been advised regarding the vehicle’s actual value as he was merely a lay person (who would not have known what the retail value was when signing the proposal form).

The insurer stated that the claim was settled in accordance with its policy wording and provided the Ombud with a copy of the proposal form which had been signed by the insured. The proposal form contained the details of Mr. B’s vehicle and noted the sum insured as R52 100. Mr B was paying a premium based on the sum assured and the insurer thus settled the claim, based on this amount.

A broker represented Mr. B and acted as his agent. The broker had provided the incorrect value of Mr. B’s vehicle on the proposal form. Mr. B. had signed the proposal form and by doing so he had indicated that he had accepted the information on the proposal form as true and correct. The insurer settled the claim in accordance with its liability in terms of its policy wording. The Ombudsman agreed with the insurer’s calculation of the offer.

In November last year, a similar case was tested by the FAIS Ombud. The respondent claimed that the insurer “…erred in capturing the home contents cover as R100 000 and not R1 000 000 as intended.” This ended up with the insured being grossly under insured. When a claim arose, the financial adviser was ordered to pay the shortfall of R124 960.23.

The insurer, although not held liable by the Ombud, agreed to share the cost with the FSP.

One of the findings by the Ombud in this case reads:

Respondents failed to ensure that the information contained in the quote was factually correct. Instead, they requested complainant to initial every page and sign it to confirm the accuracy thereof. In simple terms, respondents shifted their duty in terms of the Code to complainant.

The original policy’s premium was R634.53 for approximately R1 000 000 worth of cover whereas the new insurer charged R192 for a R100 000.

While it is to be expected of a professional adviser to notice the vast difference in premium where the cover decreases to 10% of what it originally was, is it unfair to expect a client to query the same?

While different sets of legislation apply as far as the various Ombuds are concerned, it does appear that contradicting conclusions will be with us for the foreseeable future.

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