The FAIS Ombud’s annual report contains a list of trends picked up during the course of the year. The golden thread which runs through all of these, concerns insufficient disclosure across all sectors of the market. Failure to disclose full details on trial commission, short-term excesses, termination costs, replacement penalties and complex policy wording and definitions all come under the spotlight. There is even mention of downright fraud, particularly in the assistance business arena, where the Ombud states:
“This area of business is fraught with problems, most of which include fraud. Funeral business remains a challenge to the FAIS Ombud in many respects.”
We publish below examples of actual settlements which reflect some of the recurring problems:
Failure to act with due skill, care and diligence
The complainant lodged a death claim with the respondent after the passing of her spouse. The claim was rejected due to a three-year waiting period for death as a result of natural causes. The complainant could not understand this as the policy was incepted some four years ago. She then submitted her complaint to our Office for assistance. The matter was investigated during which it was discovered that the respondent had advised the complainant to cancel an existing risk policy and take a new policy with another insurer. However, prior to the new policy being accepted, the representative proceeded to cancel the existing policy of the deceased. The new application was subsequently declined. The representative then advised the complainant to re-instate the old policy. However, this policy was now subject to a three year waiting period. The insured died within this three year waiting period and when a claim was submitted, the respondent was only prepared to refund the premiums paid. A recommendation was then made to the respondent, after which they agreed to settle the matter by paying the complainant an amount R734 341.
Failure to provide concise details of any special terms, exclusions of liability, restrictions, etc.
The complaint pertains to the rejection of a credit life claim. After the passing of the insured, the executor of the estate lodged a claim with the respondent for the settlement of the outstanding balance on his mortgage bond. The insurer rejected the claim on the basis that the deceased died as a result of a pre-existing condition. Aggrieved by the rejection of the claim, the complainant turned to the Ombud for assistance. The complaint was forwarded to the respondent, requesting documentary proof that they had made the complainant aware of the exclusion clause relating to pre-existing conditions. The respondent could neither furnish the requested document, nor could they provide evidence that their application form makes provision for an applicant to disclose his/her pre-existing condition. After highlighting this to the respondent, they agreed to honour the claim of R400 000.
Failure to provide concise details of excess payable
According to the complainant, when he lodged a claim under his short term policy, he was required to pay additional excesses that were not disclosed to him at point of sale. The complainant contends that he was willing to pay the basic excess, which is the only excess that was disclosed to him. As the insurer was not prepared to waive the additional excesses payable, the complainant turned to the Ombud for assistance. Upon receipt of his complaint, the Office requested the respondent to provide proof that additional excesses were disclosed to the complainant prior to the inception of the policy. The respondent promptly settled the matter by waiving the additional excesses.
Failure to disclose excesses applicable to the policy
During January 2011, the complainant obtained commercial short-term insurance cover for his trucks with the assistance of the respondent. The complainant subsequently lodged two claims with the insurer for damages suffered to his trucks on the 31st March 2011 and during May 2011, respectively. The complainant was surprised to learn that he had to pay an amount of R15 000 for each claim as a result of an excess applicable to foreign drivers. The complainant queried this issue with the respondent, claiming that he had not been informed of the additional excesses applicable to foreign drivers. He was advised that all excesses had been listed on the policy schedule. Not satisfied with the explanation, the complainant lodged a complaint with the Ombud. The respondent denied any wrongdoing in the initial response to the complaint. After the Office highlighted the respondent’s duty to disclose all excesses and monetary obligations to the client, the matter was settled for R30 000.
Determinations made by the FAIS Ombud often receive a lot of exposure, settlements far less so. There were only 23 determinations last year, compared to 789 settlements. The latter is not published on the Ombud’s website, but a quarterly newsletter published by the office of the Ombud, Under the Baobab Tree, often contains very informative views on such settlements.
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