The latest determination by the FAIS Ombud is a good example of why it is so necessary to make sure that you inform your client of any material changes to an existing product.
In this instance, it concerns a complaint by a client which was upheld after a claim was rejected. Interestingly enough, the rejection of the claim was endorsed by the Short-term Ombud, who referred the matter to the FAIS Ombud. The latter decided for the complainant, ordering the broker to make good the client’s loss.
The client was insured with Zurich, but in 2008, the cover was moved to Hollard. In fact, the broker’s entire book moved to the new insurer. It would appear that certain new conditions were not conveyed to the client, although the client did receive a letter confirming that the new insurer would be Hollard.
The complainant asserts that when his insurance cover was placed with Zurich in 2006, he informed the respondent of all security features at his property. However, when his insurance cover was moved to Hollard, the respondent neither requested additional information from him nor conducted an inspection of his premises.
Section 7(1) of the Code clearly placed an obligation on the respondent to have disclosed to the complainant that Hollard had introduced the material term relating to the burglar bars and security gates to his policy. The respondent had to explain to the complainant that as a result of the endorsement it was condition of the policy that all opening windows and all external doors of the insured property had to be equipped with burglar bars and security gates.
Upon request by the Office, the respondent could not provide any evidence that the disclosure of the endorsement was made to the complainant. The respondent could also not provide any record of the advice that was furnished to the complainant as required by Section 9 of the Code. Although the respondent argued that the complainant received the latest policy schedule, he could not provide proof that it was actually sent to the complainant. In any event, providing a client with a policy schedule is not sufficient to discharge the duty placed on him by Section 7(1) of the Code. It was required of the respondent that he, at the earliest reasonable opportunity, provide the complainant with concise details of the material terms of the policy to enable the complainant to make an informed decision. Although the respondent was aware of the endorsement, he failed to inform the complainant of the terms introduced by the endorsement.
This case again underlines the importance of ascertaining exactly what differences apply when switching a book, and informing your clients in verifiable format.