Fail­ure to ob­tain all rel­e­vant de­tails a fac­tor in com­plainants win­ning their cases

Pretoria News Weekend - - OPINION -

IN MANY cases, the FAIS Om­bud reaches a set­tle­ment with a fi­nan­cial ser­vices provider (FSP) be­fore a com­plaint gets to the de­ter­mi­na­tion stage. This is in the in­ter­ests of the FSP, be­cause its name is not made pub­lic, as in the case of a de­ter­mi­na­tion.

Be­low are three cases high­lighted in the FAIS Om­bud’s an­nual report in which a set­tle­ment was reached. Fail­ure to dis­close the risk of un­der­in­sur­ance. Af­ter a fire in June 2015, Mr A lodged a claim with his in­surer on his home­owner’s pol­icy. The dam­age was as­sessed as be­ing to the value of R261 000. The in­surer of­fered to pay R141 000, stat­ing that Mr A had been un­der-in­sured and that, as a re­sult, it had ap­plied the rule of av­er­age in de­ter­min­ing the amount of the pay­out. (The rule of av­er­age is when an in­surer de­creases a pay­out in pro­por­tion to the de­gree of un­der-in­surance.) Mr A claimed not to have been in­formed of the re­quire­ment to have the build­ing in­sured for its re­place­ment value.

On tak­ing up his case, the om­bud asked the in­surer to show it had com­plied with the code of con­duct un­der the FAIS Act. Specif­i­cally, it had to pro­vide proof that its rep­re­sen­ta­tive had ob­tained all rel­e­vant and avail­able in­for­ma­tion to en­sure that the prod­uct was ap­pro­pri­ate.

The in­surer was un­able to pro­vide any ev­i­dence to show it had com­plied with the code, and could only point to hav­ing sent Mr A pol­icy sched­ules an­nu­ally. The in­surer main­tained that it was Mr A’s re­spon­si­bil­ity to en­sure that he was ad­e­quately cov­ered.

Af­ter the om­bud’s of­fice main­tained its stance on the in­surer’s fail­ure to ad­e­quately pro­vide for Mr A’s needs, the in­surer of­fered an amount in set­tle­ment of the mat­ter.

Set­tle­ment: R120 000 Fail­ure to dis­close pre-ex­ist­ing con­di­tion clause. Mr B took out a life as­sur­ance pol­icy that in­cluded an in­come-pro­tec­tion and a dis­abil­ity ben­e­fit. He was later de­clared med­i­cally un­fit to work.

When he sub­mit­ted a claim with the life com­pany in terms of the in­come-pro­tec­tion ben­e­fit, the claim was re­jected on the grounds that it had been sub­mit­ted dur­ing the wait­ing pe­riod. The as­surer said the pol­icy terms pro­vided for a 24-month wait­ing pe­riod on pre-ex­ist­ing med­i­cal con­di­tions, and the ill­ness that had ren­dered Mr B un­fit to per­form his du­ties had arisen di­rectly from such a pre-ex­ist­ing con­di­tion.

In cor­re­spon­dence with the om­bud’s of­fice, the as­surer said the prod­uct was suit­able for Mr B, be­cause it catered for the need that had been iden­ti­fied. Mr B knew of the ex­clu­sions, it said, be­cause these had been dis­closed in both the ap­pli­ca­tion form and the pol­icy sched­ule.

How­ever, the om­bud drew the life as­surer’s at­ten­tion to the fact that it had failed to ad­vise Mr B of the blan­ket ex­clu­sion on the pol­icy with re­gard to pre-ex­ist­ing con­di­tions. In ad­di­tion, it had failed to elicit in­for­ma­tion from the com­plainant per­tain­ing to his med­i­cal his­tory. This in­for­ma­tion was both rel­e­vant and avail­able, and, if it had been re­quested, the un­suit­abil­ity of the prod­uct would have been ev­i­dent.

The life com­pany re­sponded by making an of­fer that set­tled the mat­ter in full.

Set­tle­ment: R563 581 Fail­ure to pro­vide ap­pro­pri­ate ad­vice. Mr C re­tired as a mem­ber of his em­ployer’s pen­sion fund. He was the sole provider for his fam­ily, sup­port­ing his wife and de­pen­dent child, who was a stu­dent. Mr C had sus­tained a sig­nif­i­cant amount of debt, which he had con­sol­i­dated by tak­ing out a loan shortly be­fore he re­tired. This had been done in the knowl­edge that he would have ac­cess to one-third of his pen­sion ben­e­fit, which he could use to set­tle the loan.

On con­sult­ing an FSP, he was ad­vised to buy an an­nu­ity, which re­sulted in his en­tire pen­sion ben­e­fit be­ing trans­ferred into the an­nu­ity. When Mr C asked about tak­ing a third of the pen­sion ben­e­fit in the form of a lump sum, he was told that he was un­able to ac­cess the money.

Tak­ing up his case, the om­bud asked the FSP for ev­i­dence that it had ob­tained all avail­able in­for­ma­tion about Mr B’s fi­nan­cial sit­u­a­tion. It was estab­lished that the FSP had not kept a record of the ad­vice and had failed to take Mr C’s cir­cum­stances into ac­count. This fail­ure had re­sulted in an out­come that was in­ap­pro­pri­ate to Mr C’s needs. The om­bud rec­om­mended that the FSP pay Mr C an amount equal to one-third of his re­tire­ment ben­e­fit in a full and fi­nal set­tle­ment, which it did.

Set­tle­ment: R570 994

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