Ombud slams assurer for shoddy service

Despite financial hardship, consumers are making an effort to close the insurance gap, which is the difference between the actual risk cover they have and the amount they need, according to the Association for Savings & Investment SA (Asisa).

The 2016 Life and Disability Insurance Gap Study, conducted by Asisa in partnership with True South Actuaries & Consultants, indicates that the average South African earner has an insurance gap of R2.1 million.

Hennie de Villiers, the deputy chair of the Asisa life and risk board committee, says recurring premium risk business showed strong growth of nine percent in 2016. Consumers took out 5.2 million new individual risk policies to cover events such as death, disability and dread disease, compared with 4.8 million policies in 2015.

He says the seven-percent drop in the first-year policy lapse rate also highlights that consumers are serious about increasing their risk cover. (A lapse occurs when the policyholder stops paying premiums.)

De Villiers says that the immediate benefit of saving the monthly premium by lapsing the policy comes at the cost of an asset in the future the policy payout.

STAFF REPORTER

Assurance company Channel Life has been castigated by the Ombudsman for Long-term Insurance, Judge Ron McLaren, for its “lackadaisical” approach to the administration of a claim.

The ombudsman said his office had seldom seen “such poor level of service” and ordered that compensation of R7 500 be paid to the complainant for suffering material inconvenience and distress.

On November 4, 2013, Mr A, who had a life assurance policy with Channel Life, died. A claim was submitted by Mr A’s widow on December 13 2013.

Between December 17, 2013 and November 24, 2015, Channel Life asked the attorneys handling Mr A’s estate no fewer than five times to submit the same set of documents, despite these having been provided to the assurer on February 24, 2014.

Channel Life paid out R2 384 on May 12, 2016. It paid the balance, amounting to R21 789, on June 3, 2016, two-and-a-half years after the claim was submitted. The assurer told the claimant that no interest would be paid because the assessment of the claim had been delayed by the late submission by the executor of the estate of outstanding claim requirements.

A complaint was lodged with the ombudsman by Mr A’s widow. Following intervention by the ombudsman, Channel Life agreed to pay interest calculated from June 18, 2014.

The ombudsman then asked Channel Life to consider paying a compensatory award. Channel Life offered R1 500, which was declined by the complainant.

The matter was discussed at an adjudicator’s meeting, and the ombudsman made a provisional determination on the basis that Channel Life was in possession of the required claim documentation as early as June 17, 2014 and that the continued requests for documentation after that date delayed the payment of the claim and caused Mr A’s widow material inconvenience and distress.

The meeting also held that, following the initial payment of R2 384, the complainant was further inconvenienced when the balance of the claim was not paid. It agreed that a compensatory payment of R7 500 be awarded for the material inconvenience and distress caused.

Channel Life disputed the provisional determination and submitted that on June 17, 2014, it was under the impression that there were still outstanding documents. It said the reason for the continued requests was the failure by the executor of the estate to respond to its requests. The assurer accepted that it had delayed the full payment, but submitted that “this was due to values confirmation”.

It added that R7 500 as a compensatory award was out of line with precedents and was not fairly balanced. It argued that, while it had not acted expeditiously in the matter, at the same time, it had not been at fault. Channel Life offered compensation of R2 500, which was again rejected by the complainant.

The matter was again discussed at an adjudicator’s meeting on January 20 this year and the provisional determination was upheld for the following reasons:

The information on file confirmed that Channel Life was in receipt of all the claim requirements on June 18, 2014;

Channel Life’s repeated requests, over a long period, for documentation already in its possession, delayed the claim unnecessarily;

The unnecessary delay exacerbated the already stressful situation that the complainant found herself in, following the death of her spouse;

Channel Life’s approach to the administration of the claim was lackadaisical;

The complainant had suffered material inconvenience and distress as a result of Channel Life’s maladministration of the claim;

The office of the ombudsman had seldom seen such a poor level of service;

An award of compensation is not a penalty, or form of punishment; and

No determination by the Ombudsman for Long-term Insurance sets a precedent.

Channel Life was instructed to pay the compensation of R7 500. The insurer complied.