Life ombudsman recovers R187m for policyholders

The Ombudsman for Long-term Insurance also awarded over R480 000 to complainants to compensate them for inconvenience. reports

The office of the Ombudsman for Long-term Insurance, Judge Ron McLaren, recovered R187.7 million for consumers last year (up slightly from R184.4m in 2015), which equates to about R750 000 per working day of the year. This is according to the ombudsman’s annual report for 2016, which was released this week.

The ombudsman awarded a further R487 335 to complainants as compensation for poor service by life assurance companies. (Apart from resolving questions of liability and fair ness in the handling of claims, the ombudsman has the authority to order a life company to reimburse a complainant for distress and inconvenience caused by, for example, dragging its feet when settling a claim or responding to a complaint.)

In 2016, the office received 9 871 written requests for assistance, of which 5 284 became chargeable complaints. Of these, 3 324 were finalised. Almost half of the finalised cases concerned rejected claims, and these were mainly (83%) for life cover and disability cover.

In 2015, the ombudsman’s of fice implemented a new operating model whereby complaints are first passed on to the assurance companies themselves for resolution. McLaren said: “Although the percentage of cases resolved wholly or partially in favour of complainants in 2016 is lower than previous years, at 28.1%, we must take into account the impact of our new operating model. If we add the cases resolved by insurers on transfer to them, this percentage rises to 37.4%.”

The ombudsman reported that it is becoming more difficult to finalise cases. Reasons include more complex products, more persistent complainants, and the impact of the new business model, which has led to simpler complaints being resolved by assurers. Despite this, the office was pleased on the whole with the turnaround rate for complaints: 78% of cases were finalised within six months.

In his report, the ombudsman finds both complainant behaviour and assurer behaviour troublesome.

The complainant behaviour issue became significant in 2015. “This is when the behaviour of a complainant takes on unreasonable dimensions,” McLaren said. “A persistent claim arises when a complainant rejects a provisional determination, leading to the requirement for a final determination.” (See “Provisional and final determinations”, below.)

In 2008, less than 1% of cases closed were the result of final determinations; in 2012, this had increased to 5.8%, and by 2016 it was 10%. “The persistence of complainants affects our productivity, as more time has to be spent on such cases.”

Life assurance companies also sometimes behave badly. “Assurer behaviour sometimes suggests a claim is being avoided at all costs,” McLaren said. “This is when the assurer demonstrably looks for reasons not to pay what appears to be a valid claim, often by raising a new defence if the original reason for declining the claim does not succeed.”

Another example of unreasonable behaviour on the part of assurance companies is expecting a claimant to prove an exclusion on which the assurer has to rely to decline a claim, instead of the assurer obtaining the information itself.

Another major concern is poor underwriting practices in which, instead of conducting proper investigations at underwriting stage, the assurer relies on a non-disclosure defence to repudiate the policy when a claim arises.

One thing on which the office prides itself is its consistency of performance. The statistics emanating from the office have been comfortingly consistent over the past three years, despite an increase in policies sold by assurers. McLaren attributes this to the stability of his staff and the low staff turnover rate.

He emphasises that his office is independent and provides a free service to the public.

“We will continue to strive to render an effective, efficient and fair complaints-resolution service for complainants and insurers,” he said in his report.

martin.hesse@inl.co.za