Secondary

FAIS Ombud

Hindsight and Objectivity

The recent Molate determination, in which Discovery Life was held liable for losses incurred after the death of a life assured, again raises the issue of objectivity with the benefit of hindsight.

Background

The complainant made an enquiry regarding life cover at one of the Virgin Active Health Clubs. This enquiry led to the call made by respondent’s direct marketing division, Discovery Connect Distribution Channel, to the complainant on 23 March 2015. Through the telephonic interaction, complainant concluded a contract for herself and her late husband, each applying for R2 million life cover. The amount was based on advice provided by the respondent’s call centre, and the inception date of the cover was 1 May 2015.

The complainant’s husband was killed in a motor vehicle accident on 18 April 2015, 13 days before inception of the policy.

Discovery declined the claim, but did pay out R 400 000 as, what it termed, “Immediate Cover.”

The Issue

This case centred around the insurer’s obligation to point out to the applicant that she had the right to request an earlier date of entry.

She was informed during the call that the commencement date would be 1 May 2015 as it was a ‘little too late’ in the month to begin the policy in April. This was in fact in line with the script provided to call centre agents to ensure sufficient time to launch debit orders in time.

When the widow phoned Discovery to lodge the claim, she was told that the assurer does offer immediate life cover for the full amount, should the client request this. One of the conditions for the payment of immediate cover was that a client should not have requested a future entry date. She was then told that the respondent’s legal team would listen to the recording and make an evaluation of the claim.

A subsequent letter from Discovery states:

“We are currently assessing your claim for the late Lehlogonolo Abner Molate. It has come to my attention that the Discovery policy was sold to you telephonically on 23/03/2015 and your application commencement of the contract was 01/05/2015 (a date which was not selected by yourself but rather communicated…, Thompson.). Based on the information we received from new Business we are now re-assessing your claim”

The Complaint

“I believe I was denied the choice to have full immediate cover due to incorrect information at the point of sale. I was ill-advised by the Discovery Life’s Sales Consultant — as a result, I did not get the full pay out I would have if I had been given the correct information. In my conversations with the Sales Consultant, Claims Administrator and Assessor, it can be observed that I was in fact disadvantaged by the information given by the Sales Consultant”.

Response

Concerning the issue at dispute, Discovery conceded that it did ‘not explicitly give the complainant an option as to the date on which the policy would commence’. However, it submitted that it is not necessarily standard practice for an advisor to provide a client with such an option in the first instance. It depends on the response from the client as to whether or not the advisor goes into further detail regarding the selecting of a particular commencement date.

Ombud Finding

Concerning this matter, the Ombud notes:

“The challenge for respondents in all of this is that they have provided to this Office a record that shows objectively, that complainant was not advised that she had the right to choose the date of inception, nor the right to object to the date given to her. Apart from making this claim respondent makes no case whatsoever as to how complainant would have known of these rights.”

Special reference is made to the following:

Section 15 (3) (j) – a provider, prior to the conclusion of any transaction, must provide 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 the light of a recent article we published on the 179 page explanatory document Discovery provides when life cover is affected, one can rightly question the relevance of this section in so far as the entry date is concerned.

Hindsight

The Ombud holds that the complainant and her late husband had no life cover whatsoever at the time of application, and had never been covered before.

Why then, would they have insisted on immediate cover, having never had regard or the need for this before?

One cannot help but think that hindsight in this case worked against the respondent.

Click here to download the Molate determination.

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