Poor Administration or Negligence

Section 11 of the General Code of Conduct states:

`A provider must at all times have and effectively employ the resources, procedures and appropriate technological systems that can reasonably be expected to eliminate, as far as reasonably possible, the risk that clients, product suppliers and other providers or representatives will suffer financial loss through theft, fraud, other dishonest acts, poor administration, negligence, professional misconduct or culpable omissions.’

The recent Carazzo determination by the FAIS Ombud, stemming from a FSP’s failure to submit a claim in time, is an example of the importance of the words highlighted above.

The complainant’s policy was underwritten by Saxum Insurance Limited through Niche Administrators. Niche Administrators stopped trading and had their license revoked by the Financial Services Board in 2008. On 25 March 2009, the Registrar of Short-Term Insurance appointed the Innovation Group to administer all claims on behalf of Saxum. The underwriter required that all documentation be submitted on or before 31 March 2009.

The complainant filed a claim following a motor vehicle accident on 14 November 2008. He followed up with the respondent and was told that the claim was in process. This happened several times over a few months, and he was eventually told that Innovation would be handling his claim. Later, the complainant contacted Innovation directly and was advised that his claim had not been received from Respondent.

A spreadsheet containing a list of twenty one claims was e-mailed by the respondent to Innovation on 22 January 2009. The e-mail stated, ‘Attached all my outstanding claims as discussed!!!’ The list contained all the claimants’ surnames and initials in alphabetical order, along with supporting documents. This was followed up on 18 February 2009, again with the list of 21 claims, but the complainant’s details did not appear on either of these two communications.

In response to a request from the Ombud, the respondent provided a printed copy of the “original” email containing the claim of complainant, but Innovation denied the authenticity of this document.

The respondent was asked to submit the actual e-mail of the 18th February 2009. This request was repeated on several occasions during the course of the investigation. The respondent, however, never provided the e-mail in the required format. Innovation also pointed out that, in the printed version, the complainant’s details were not inserted in alphabetical order like the rest of the claims.

The respondent also asserted that there were further e-mails and phone calls to Innovation to which he never received any response, but he was unable to provide documentary proof of such communications.

The Ombud concludes:

“In summation, I am persuaded that, on the evidence, the probabilities favour the conclusion that Complainant’s claim was not properly submitted. Adding weight to this conclusion is Respondent’s failure to submit the pertinent e-mail in the required format, in spite of more than a few requests by the Office.”

“As such Respondent has breached the requirements of section 11 of the General Code in allowing the Complainant to suffer loss through either poor administration or negligence. There is also a failure to comply with section (3) 2 of the Code, which requires that records relating to financial services rendered to clients be maintained. Overall, Respondent’s cavalier attitude, as demonstrated in the manner in which he dealt with Complainant’s claim, is in sharp contrast with section 2 of the General Code, which calls for due skill, care and diligence in rendering financial service.”

“The respondents are hereby ordered, jointly and severally, the one paying the other to be absolved, to pay to Complainant the amount of R20 173.35.”

One question which arises from the above is whether further investigations regarding the honesty and integrity of the FSP will be conducted on the possible submission of a forged document.

Please click here to download the full determination.

Readers who wish to comment on this are welcome to email Paul Kruger.

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