Cases where re­spon­dents have set­tled be­fore de­ter­mi­na­tion stage

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

Keep­ing proper records is an es­sen­tial re­quire­ment of the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices (FAIS) Act – and it was this fail­ure that saw a life as­sur­ance com­pany hav­ing to pay out R597 100 in a set­tle­ment with the es­tate of a credit life pol­i­cy­holder.

The pol­i­cy­holder had taken out an “auto set­tle­ment” pol­icy (a credit life pol­icy) when buy­ing a new ve­hi­cle. The pol­icy was re­stricted to death and re­trench­ment cover, be­cause the pol­i­cy­holder suf­fered from di­a­betes, which he de­clared.

The as­sur­ance com­pany sent the pol­i­cy­holder var­i­ous dis­clo­sure doc­u­ments to sign, but the FAIS Om­bud, Nol­untu Bam, says it is un­clear whether the doc­u­ments were ever brought to the at­ten­tion of the pol­i­cy­holder.

The as­sur­ance com­pany re­pu­di­ated a claim on the death of the pol­i­cy­holder and claimed that the pol­i­cy­holder had tele­phoned the com­pany and told it that he no longer wanted the pol­icy.

But it could pro­duce no proof of the tele­phone call or any doc­u­men­ta­tion to back its re­pu­di­a­tion of the claim. The as­sur­ance com­pany of­fered the set­tle­ment amount, which was ac­cepted.


Other set­tle­ments pub­lished in the FAIS Om­bud’s 2012/2013 re­port in­clude the fol­low­ing:

◆ It does not al­ways pay fi­nan­cial ad­vis­ers to re­place one prod­uct with another, par­tic­u­larly when they do not check the date of ex­piry of the old prod­uct against the date of in­cep­tion of the new prod­uct. In this case, it cost a fi­nan­cial ad­viser R400 000. The com­plainant’s late fa­ther had switched life poli­cies be­fore his death. The in­cep­tion date of the new pol­icy was Septem­ber 8, 2011– five days af­ter he died. It ap­peared that by this time the ex­ist­ing pol­icy had been can­celled.

The ad­viser ar­gued that the old pol­icy was, in fact, still valid be­cause the premi­ums were paid on the 10th of each month.

But even though the last pre­mium was paid on Au­gust 10, this did not mean the cover car­ried through to Septem­ber 10. Cover was only for the cal­en­dar month in which the pre­mium was paid.

The com­plainant ac­cepted the R400 000 set­tle­ment of­fer.

◆ Another fi­nan­cial ser­vices provider had to pay up R102 219 when one of its rep­re­sen­ta­tives ad­vised a client to switch from one in­vest­ment to another and then failed to process the change prop­erly.

Be­fore fi­nal­is­ing the trans­fer, the rep­re­sen­ta­tive left the em­ploy­ment of the provider. This re­sulted in the in­vest­ment cap­i­tal be­ing trans­ferred into a “sus­pen­sion ac­count”.

When the in­vestor be­came aware of the fail­ure to in­vest the money ac­cord­ing to his in­struc­tions, he asked for his cap­i­tal to be re­turned with the re­turns it would have earned if it had been prop­erly in­vested.

The fi­nan­cial ser­vices provider re­jected the claim on the ba­sis that the in­vestor could “not pro­vide proof of pay­ment”:

Bam pointed out that this was un­fair, and the provider agreed to meet the in­vestor’s de­mands.

◆ Another ad­viser who switched an in­vestor from one prod­uct to another agreed he would not be paid a com­mis­sion. But he was, and claimed that the in­vestor had agreed to the com­mis­sion of R44 533. How­ever, the in­vest­ment doc­u­ment stated that 100 per­cent of the cap­i­tal would be in­vested which, ac­cord­ing to Bam, cre­ated the im­pres­sion that com­mis­sion should not be de­ducted.

◆ When you ask for life as­sur­ance cover, the fi­nan­cial ser­vices provider needs to act with alacrity.

In this case, a bank had to pay R399 023 to set­tle a death ben­e­fit claim be­cause it failed to ex­e­cute an in­struc­tion for a home­loan pro­tec­tion plan to cover an out­stand­ing bond on the bor­rower’s death. When the bor­rower died, it was dis­cov­ered that the pol­icy had not been is­sued.

The bank could not pro­vide rel­e­vant doc­u­men­ta­tion to show that the bor­rower had turned down the home­loan pro­tec­tion pol­icy. All that could be found was that the ap­pli­ca­tion forms for the home­loan re­flected a re­quest for the cover.

The bank paid the out­stand­ing loan.

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