Retrieves R60m for consumers
More than 10 000 complaints were resolved, with short-term insurance cases topping the list
MR J AND THE CANCER BENEFIT
In February 2009, Mr J applied for a long-term insurance policy, which provided cover for life, disability and dread disease, in the amounts of R500000, R200000 and R200000 respectively.
In 2015, Mr J was diagnosed with early-stage prostate cancer, which was detected before it had begun to spread. He lodged a claim with his insurer in terms of the dread disease benefit on the policy.
The claim was rejected on the basis that cover for very-earlystage prostate cancer is specifically excluded under the cancer benefit.
Mr J was shocked to learn of this exclusion. He claimed that he had never been advised of such an exclusion when the policy was sold to him via telephone.
On referral of the complaint to the insurer, the insurer pointed out that Mr J had been provided with the full documents pertaining to his cover within 14 days of the call.
The ombud wrote back to the insurer, saying: “Based on the telesales recording submitted to our office, there is no evidence that it was in fact discussed with the complainant that early-detected prostate cancer would not be covered under the policy.” When the insurer made no attempt to resolve the complaint, the ombud took the case under investigation.
The main case of the insurer was that Mr J had been sent documents that adequately explained the scope of cover. It stated that it would be impossible for it to know for what conditions a client may claim for and, therefore, impossible to provide specific explanations on those conditions. “For that reason, clients are provided with all relevant terms and conditions to read carefully and store in a safe place,” the insurer argued.
The ombud recommended that the insurer settle the complaint. It did so, paying the full amount of the benefit: R200000.
MR S AND CGT
The complainant, Mr S, was a 66-year-old retired quantity surveyor who had owned his own business. In July 2015, he met a representative of a financial product provider and asked that his funds be moved into more cautious, lowreturn investments, specifically to avoid losses. He also asked that all costs be disclosed.
The adviser recommended that the amount be split between funds. He disclosed his fees and
Mr S agreed to the transaction.
Mr S subsequently got a shock to see that R299958 had been deducted for capital gains tax as a result of the transaction.
He complained that he had not been advised of the tax implications of the transaction and argued that he would have never agreed to the transaction had he known.
To meet the tax bill, Mr S had had to sell a property because he could not afford to pay it from his retirement savings. That disposal also attracted capital gains tax.
Following intervention by the ombud, the financial institution made an offer to settle, which was accepted by Mr S.
THE office of the Ombud for Financial Services Providers, better known as the financial advice or Fais Ombud, clawed back more than R60 million for consumers in its 2017/18 financial year, with shortterm insurance remaining the most complained-about financial sector.
The report, released last week, shows that the office received a total of 10211 new complaints during the year, a slight reduction from the 10846 received during the 2016/2017 financial year.
It was the second consecutive year that the office had received more than 10 000 complaints, with the office resolving 10 542 complaints in total (this includes some carried over from the previous financial year).
The amount clawed back for consumers in the settled or determined cases also showed an increase: R60889786, up from R58343824 in 2016/2017.
Of the 10542 complaints resolved in the 2017/18 year, 6303 (59.8%) were dismissed, 2799 (26.6%) were non-justiciable – meaning they fell outside the ombud’s mandate and were referred to the appropriate fora – and 1440 (13.2%) were resolved in favour of the complainant.
Of the 1440 cases resolved in favour of complainants, a large majority (1392) were settled before determination stage.
The ombud made 48 determinations during the 12 months under review.
A breakdown of the justiciable complaints received according to the different types of products shows that the short-term insurance industry tops the list (it has done so historically), but that complaints about long-term insurance products (life and disability insurance) are not far behind:
● Short-term insurance: 3243 (40.7%)
● Long-term insurance: 3100 (38.9%)
● Investment: 1231 (15.4%)
● Retirement: 277 (3.4%)
● Medical: 126 (1.6%)
The outgoing ombud, Noluntu Bam (she was succeeded in May by Naresh Tulsie), says in the report: “The numbers confirm that South African consumers have put their faith in the Fais Ombud.
They trust the office. It does not matter to the consumer that he does not have to present himself at the Fais Ombud – he does so. Young, old, rich, poor, literate, illiterate – we have welcomed them this year… It is an undisputed fact the Fais Ombud has changed the way the financial services game is played.” THE PROFILE Group, which supplies data on collective investments to the local financial industry, has increased its shareholding in the fund rating agency Plexcrown Fund Ratings to 100%.
The number of collective investments offered by South African institutions has grown to more than 1 500, outnumbering Jse-listed shares by three to one. Since 2005, Plexcrown has earned a reputation as the leading retail unit trust fund rating agency in South Africa. “We pride ourselves on being in the forefront of statistical research, especially in the unit trust industry where we have developed rating and information products to serve our stakeholders,” says Ernie Alexander, chairman of the Profile Group.