The Office of the FAIS Ombud often receives complaints related to alleged unfair rejection of claims. One of the latest deals with the calculation of a waiting period that may be imposed in a funeral policy.
Unpacking funeral cover waiting periods
When applying for a funeral policy, no medical underwriting is conducted by the insurer to determine the potential risk presented by the lives assured. To manage this risk, insurers include amongst other mechanisms, waiting periods where no benefit will be paid if death occurs because of natural causes before the expiration of the waiting period.
A case in point
The complainant applied for a funeral policy with the respondent, a registered Financial Services Provider in terms of the FAIS Act, that markets itself as a funeral service and assurance provider.
|●||The complainant claimed that the first premium was debited on the 14th of December 2019, and that his mother (the life assured on the policy) passed away on 8th of June 2020.|
|●||The subsequent claim was rejected by the respondent on the grounds that the deceased had passed away within the waiting period which the respondent claimed was in place until 14 June 2020.|
|●||The complainant was not satisfied with the rejection and the reasons advanced by the respondent, as she argued that the policy terms and conditions provided that the inception date of her policy was in fact the 1st of December 2019, which means that the 6-month waiting period had expired prior to the deceased’s passing.|
Upon investigation the FAIS Ombud examined the policy schedule and noted the following: “Insurance cover in terms of the Policy commences on the inception date. This inception date is determined by the date a first premium is received. Should a premium be received between the 1st and the 15th of that month, the inception date will be the 1st of that particular month AND should premium be received between the 16th and the last day of that particular month, the inception date will the 1st of the following month.”
Appreciating the fact that the first premium was collected on 14 December 2019 the inception date as noted on the contract, which was stipulated as 14 December 2019, was contradictory to the terms and conditions. The inception date of the policy should have been recorded as 1 December 2019, which would have provided for a successful claim.
As a result, the claim was reviewed and settled in favour of the complainant. “We are internally rectifying any administration challenges that affect both us and our clients to avoid such future incidents from happening. We would like to thank you Ombudsman for allowing us the time to investigate and improve were necessary,” the FSP responded.
This is simply not good enough. The industry is constantly battling to enhance its reputation. Blatant disregard for the insurer’s own policy schedule will no doubt be blamed on a minion, or clerical error. The Ombud notes that this is one of two such incidences. How many others will simply just be swept under the carpet as the client is unable to review and understand the policy wording?
At best, the matter should be brought to the attention of the FSCA, who should insist on an audit of all other related refuted claims, an undertaking (no pun intended) to rectify all errors, and a hefty penalty for such a serious transgression.
Click here to download the FAIS Ombud media release.