Cases where respondents have settled before determination stage

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.

FURTHER CASES

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.