Secondary

FAIS Ombud

Direct Insurer found wanting by Ombud

Masimdumise Gabriel Bhengu (the complainant) referred a declined claim by Outsurance Insurance Company Limited (the respondent) to the FAIS Ombud.

The complaint stems from the complainant’s view that Outsurance failed to ensure that the he was properly informed and appropriately insured, and specifically that the respondent failed to properly advise and disclose the applicable exclusions.

As a result of the respondent’s conduct, the complainant’s laptop was not insured. This exclusion formed the basis of the respondent’s rejection of the complainant’s claim after his laptop was irreparably damaged by liquid.

The basis of the rejection reads:

‘Your Macbook was not specified. Anything over R1500 needs to be specified and also if it is damaged in the house it needs to be (pause) electronics are not covered. So it must be furniture and it must be items forming part of the furniture, not your electronics. Your electronics that you can take out of the house you need to specify under Out and About’.

The complainant argued that he had not been advised that any item over R1500 had to be specifically listed.

In correspondence with Outsurance, the Ombud indicated the following:

‘The fact that “Cell phones and portable computer equipment are only covered if they are noted under specified Out- and-About cover on your schedule” was never addressed with the client, not once during the call.’

In her determination, the Ombud also notes:

“The complainant was never advised that Out-and-About Cover also included cover for accidental breakage.”

In its formal response to the Ombud, Outsurance indicated, amongst other points, that, under its “Contents” cover, more specifically the accidental breakage section, cover is provided for accidental breakage of television sets, mirrors or glass forming part of the furniture. There is no cover for accidental damage to any other items.

The respondent also intimated that, “During the sales conversation the complainant was advised that cell phones and portable computer equipment will not be covered under accidental breakage.”

“During the conversation the complainant mentioned that he owns a number of watches and therefore this was used as a point of reference when Out-and-About cover was explained. At no point did the complainant mention that he has cell phones or laptops, to enable the advisor to advise him accordingly.

Two of the key questions considered by the Ombud concerned:

  1. Whether, in rendering the financial service, the respondent made enquiries to establish whether the financial product or products concerned will be appropriate, regard being had to the client’s risk profile and financial needs, and circumstances.’
  2. Whether, prior to the conclusion of the transaction, the direct marketer provided the client with the following information:
    ‘ Concise details of any special terms and conditions, exclusions, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided;’

In her determination, the Ombud notes:

“The recorded conversation between the complainant and the respondent’s representative reveals very little by way of an attempt to actually solicit detailed information from the client which would enable the respondent to comply with sections 15 (2) (a) and 3(1) (a) (iii) of the Code. This was particularly pertinent in that the complainant was applying for household contents insurance for the first time. On his version he was unaware of the risks posed by a failure to specifically list particular items.

The fundamental issue to consider when dealing with direct marketing is that the respondent is both in control of the conversation and, one would expect, more than familiar with the risks of an item being excluded due to it not being mentioned or listed by complainant. This is not something within complainant’s sphere of knowledge or expertise.

The duty therefore rests on respondent as the expert to appropriately inform and assist the complainant in this regard. Accordingly, I would have expected the respondent’s questions to elicit full and complete details of the insured items in order to avoid such risks as the one that confronted the complainant. No probative questions were asked; the emphasis instead was on the globular, overall insured value of the complainant’s assets.

“Bearing in mind the complainant’s circumstances, the respondent’s conduct amounts to a dereliction of duty.”

“Respondent is hereby ordered, to within seven (7) days from date of this order replace the laptop using a supplier of its choice; failing which, pay to complainant the amount of R11 740.”

Whilst the amount involved is negligible, it must be a major concern that the script used by its call centre agents, if it was followed religiously by the individual concerned, falls far short of what is required.

Please click here to download the full determination.

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