THE GANAS EFFECT

Momentum’s iniquitous initial decision on Nathan Ganas has sparked much-needed introspection in the insurance industry

In October last year Gerhard Joubert, a livewire 54-year-old life insurance veteran, did something seriously nasty to his back. He’d gone to Dahab on Egypt’s Red Sea to do some scuba diving. But to get to the diving site, he had to walk for hours carrying weights, which left him almost unable to walk at all.

When he got back to SA, Joubert had an operation to fix the problem. From his hospital bed, where he’d be for three months, he lodged a claim on an income protection policy he’d taken out with Momentum some time earlier. It’s the sort of policy meant to provide you with a buffer of cash in exactly this sort of instance.

But Momentum balked. No, they said, we’ve noticed that 15 years before, you had an operation on your back, so we won’t be paying. Joubert was furious.

“I’d disclosed that operation to them from the start and they had no issue. And anyway, my doctor, one of the country’s top neuroscientists, confirmed that my issues now had absolutely zero to do with that spinal fusion I’d had 15 years before,” he says.

Momentum wouldn’t budge. So Joubert took the case to long-term insurance ombudsman, Ron Mclaren. In May, Mclaren found in Joubert’s favour, ordering Momentum to pay. Even then, Momentum only finally paid up in June — nine months after getting the claim. It was as if they were holding on till the last minute.

“It felt like Momentum’s claims people were looking for any excuse to tell people to go away,” says Joubert. “I’m a trained lawyer and I know this industry, so I knew to go to the ombudsman. How many others wouldn’t have known where to go, and just left it?”

Joubert is being coy here. He doesn’t just know the industry. For years, he was the top official in SA’S life insurance sector, as he headed the Life Offices Association (LOA) – the umbrella body for all life insurers, including Old Mutual, Sanlam, Liberty, MMI and Discovery. The LOA has since been replaced by the Association for Savings & Investment SA (Asisa).

But if it takes the man who was, effectively, the polit-

Still, the numbers do suggest there is some disconnect that needs examining

ical head of the industry so long to get a claim paid out, what hope do others have? It’s an apposite question, given the furore last week after Momentum refused to pay out a R2.4m life policy to the widow of Nathan Ganas, who was shot during a hijacking, on the grounds that he had “undisclosed high blood sugar”. (Facing fierce criticism, Momentum eventually paid out.)

But Ganas’s case brought the gap between insurance practices and customer expectations into sharp relief. People expect that when they have a policy, insurers should pay — not activate a squad of forensic actuaries to go through your dustbin for reasons not to do so.

Leon Campher, who now heads Asisa, says his view is that the Momentum issue “probably has caused some damage to the industry” — partly because it was badly handled.

But, he adds: “The 36 life office companies who are our members paid out R69bn in death and disability claims last year, at a payout rate of 99.3%. The ones that weren’t paid out were mostly because of forms of nondisclosure, or fraud.”

While Joubert did get some relief from the ombudsman, he was just one of 5,435 complainants to Mclaren last year. Rather alarmingly, in 29% of those complaints, the ombudsman overturned the insurer’s decision, and forced it to pay up. Customers got back R193m for claims that were initially turned down.

The 2017 ombudsman’s report shows that Momentum wasn’t the worst offender either. Although there were 262 complaints against Momentum’s parent, the MMI Group, 24.1% of them were resolved in favour of complainants like Joubert. But of large insurers with more than 100 complaints, 35.3% of cases involving Hollard were decided in favour of the complainant, 32.4% at Liberty, 31.8% at Absa Life and 30.2% at Metropolitan.

Admittedly, this is a blunt measure. But if an insurer has a disproportionately high percentage of complaints upheld over a number of years, it does raise questions.

Campher says these figures are important, but you need to see it in context. “Guys make mistakes, but there’s a far bigger picture … you’ve had 5,000 complaints on which 30% were ruled in favour of the complainant. But put that into the perspective that there are 33-million policies in issue,” he says.

Still, the numbers do suggest there is some disconnect that needs examining. “I don’t think you can use these cases to say the industry is vrot,” says Joubert.

“But changes are needed. For a start, we need a single, state-funded ombudsman for all financial services companies — including insurers, banks and brokers. People will know exactly where to go, it’ll be properly staffed with people who can help formulate claims.”

Joubert has asked the Financial Services Conduct Authority to review Momentum’s claims processes, under the “treating customers fairly” rules. It’ll be intriguing to see what the regulator decides.

But it’s important. As Joubert points out, when it takes nine months to have a simple income protection policy paid out, the consumer isn’t getting a fair deal.