Check on insurance policy small print

PERHAPS I should have seen it coming. Daily I’m asked investigate and “expose” companies’ alleged wrongdoing.

Many times the company responds by “doing the right thing”, which invariably involves a financial settlement – but on condition that the consumer signs a nondisclosure agreement.

Hence no story for me, even though I wasn’t party to that agreement.

And while I’m always happy when a consumer gets justice, it’s frustrating to put time and energy into a case – in order to publish or broadcast it, which is my job – only to be cut out of the picture as a means to an end. Thankfully it doesn’t happen too often. But it did, this past week.

And this time I’ve decided to write about it, in the public interest, because while I can’t name the insurer involved, the lessons apply to income protection policies in general.

An attorney contacted me a few weeks ago, saying she’d initiated proceedings against an insurer for refusing to honour a policy they sold her client, a hairdresser, essentially ensuring that her income would continue should she become disabled and unable to work.

The policy was taken out as a Group Life Plan when she was in partnership with another hairdresser, but at the time of the claim that company no longer existed and she was operating as a sole proprietor.

That sounds like a possible reason to reject a claim, but for the fact that the hairdresser has evidence that she informed her broker of this change at the time, and in the absence of any advice from the insurer, she assumed all was well with the policy.

The insurer claimed to have told the hairdresser that it was not possible to change her policy to fit her new working circumstances, but apparently couldn’t prove that.

It was when the hairdresser submitted a claim last year – being unable to endure standing for long due to a severe form of arthritis as well as spinal curvature, and therefore unable to work – that she learnt that there was to be no payout.

“The case is very interesting in that it highlights the blatant disregard of ethical standards and consumer rights in the sale of policies in the life and financial industry in this country,” the attorney told me.

“My client has been treated rather shockingly – in my 20 years as an attorney, I have not seen anything like this,” she said.

“Would you be interested in writing about this story? I would be most obliged if you could consider it.

“The insurer has had since November last year to settle this matter and for whatever reason has chosen not to.”

Meanwhile her client had been without an income for months and had twice been admitted to hospital for treatment for extreme anxiety.

I was very interested indeed, so she sent me the court papers and having read them, I compiled and sent an email about the case to the insurer.

I asked when and how the company informed their client that it would not be possible for her product – sold as a group plan – to be converted to an income continuation benefit for an individual person, and if that was the case, why did it continue to take premiums for the group policy for a couple of years before the claim was made? Would the premium and particulars of cover have changed had she cancelled the group cover and taken out a new policy as an individual, had she known of the need to do this?

And finally, was the company comfortable that it had ticked the required Treating Customers Fairly box in this case?

In response, I was told that the company’s CEO wanted to go through the detail of the case personally, and asked for an extension to my deadline, to which I agreed.

A week later the client’s attorney sent me an email saying: “The parties have settled the matter. As part of the settlement terms we are not allowed to discuss any aspect of the matter or the settlement terms”.

And that was that.

Income protection policies provide cover against the death, disablement – temporary and permanent – illness or unemployment of an individual. Unlike disability policies, which are paid out in a lump sum, income protection policies pay you a regular income until retirement age.

So it’s essentially an insurance against loss of earnings.

So while a lump sum disability cover can be useful for certain expenses, income protection is better for providing for your future living expenses, because it pays out a monthly income for the rest of your working life.

If you can afford it, it’s a good idea to have both.

Relatively few South Africans have income protection policies because they cost a lot more every month than disability policies.

If you are paying an income protection premium every month, as with any insurance policy, it’s a very good idea to spend time finding out exactly what you are and are not covered for.

And as this case illustrates, if your working circumstances change, it’s vital that you get written confirmation that your cover still applies.

The case is very interesting in that it highlights the blatant disregard of ethical standards and consumer rights in the sale of policies in the life and financial industry in this country

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