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Long Term Ombud Annual Report – Guidance for industry and advisers on focus areas

“We received 11 915 written requests for assistance in 2019, which was an increase of 147 requests compared to the 11 768 in 2018,” Judge Ron McLaren, Ombudsman for Long-term Insurance notes in the recently released 2019 Annual Report.

He highlighted the following:

The percentage of cases resolved in favour of complainants increased from 31.5% to 34.12%. If the transfers settled in favour of complainants are added, the resolved wholly or partially (W/P) percentage increases to 41%.
R200.4 million was recovered for complainants in the form of lump sums. However, this figure does not reflect the value of all benefits awarded in favour of complainants, such as recurring income disability benefits, annuities, the reinstatement of policies, etc.
The amount of compensation awarded to complainants in terms of Rule 3.2.5 increased from R632 737 in 160 complaints in 2018 to R874 286 in 190 complaints in 2019. This refers to “material inconvenience or distress or for financial loss suffered by a complainant as a result of error, omission or maladministration (including manifestly unacceptable or incompetent service) on the part of the subscribing member; provided that the amount of such compensation shall not exceed the sum of R50 000”.
The percentage of complaints finalised within six months was again 91% as in 2018.

Complaint categorisation

According to the report, the “Claims Declined category” had the highest number of complaints, with the “Poor Communication and Service category” the second highest, with both these categories increasing from 2018 to 2019.

For the second year the report recorded complaints according to the Treating Customers Fairly outcome categories as reflected in the Policy Protection Rules (2018 figures in brackets):

Design of policy or related service 6.1% (8.7%)
Information provided to policyholders 11.8% (9.4%)
Advice 0.8% (1.0%)
Policy performance 4.7% (4.2%)
Service to policyholders 13.0% (12.7%)
Policy accessibility, changes or switches 2.3% (1.8%)
Complaints handling 1.1% (1.2%)
Insurance risk claims 58.7% (58.2%)
Other complaints 1.5% (2.7%)

The almost insignificant number of complaints regarding “advice” is certainly a feather in the cap of advisers. Our role as intermediary between the policyholder and the product provider places a huge responsibility on us to look at other areas where we can also make a difference, particularly those relating to information provision, service and, in these times, claims.

Funeral complaints the new trend

A clear trend in this year’s report is the increase in funeral complaints. According to McLaren, the trend of increasing funeral complaints appears to be driven by the following factors:

The number of lives insured for funeral benefits has increased markedly over the years.
There are a number of new entrants selling funeral insurance in the market. Some of their practices and policies have generated complaints.
Funeral benefits cover an urgent need. The deceased has to be buried and the claimants do not have time to spare. They are quick to complain, which is understandable. This is particularly so if the insurer does not perform within the advertised payment period. There are, accordingly, many early complaints. This also explains why the 42% of cases resolved wholly or partially in favour of complainants is higher than the average W/P of 34.12%.
With other benefits, claimants more often have recourse to an intermediary to liaise with the insurer who can intercede on their behalf. With funeral benefits the Ombud office may be the only recourse if there is no satisfaction in dealings with the insurer.
Cover for extended families have resulted in numerous complaints regarding the correct description of the relationship of the insured lives to the policyholder.

We will discuss some of the case studies in more detail in a next issue.

Click here to download the statistics.

Next year’s report will provide an interesting set of data, especially to view how the statistics will be impacted by the current “new normal” we are facing in the financial services industry. Will there be an exceptional increase in complaints? This is definitely a test for both our Insurers as well as you as financial adviser. Increased communication with your clients will assist with it – stay in touch with your client and do not drop service levels.

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