Insurance brokers censured in report

Short-term insurance brokers who recommend you switch your policy to one with a cheaper premium without considering whether the new policy is suitable are one of the main sources of complaints to the financial advice ombud.

“There is still a belief that providers of shortterm insurance do not need to provide advice to their clients,” Noluntu Bam, the Ombud for Financial Services Providers, says in her annual report for the year to March 31, which was released this week.

As in previous years, short-term insurance topped the list of complaints sent to Bam’s office, comprising 2 940 of the 9 003 complaints submitted.

Bam says that, when recommending that a client changes policies, many brokers focus only on the cost of the premium, but fail to disclose how a higher excess, more stringent conditions or enhanced exclusions may affect claims.

There has also been an increase in complaints about commercial insurance policies, often where brokers have not properly understood the nature of their client’s business.

Other trends highlighted by Bam in the complaints her office received in 2014/15 were:

◆ The number of complaints about disability insurance is growing. In some cases, there is “clear evidence” that consumers are being sold cover they do not need, Bam says.

◆ Bam says there has been “an unrelenting” increase in complaints about funeral businesses, adding that the many complaints reflect a “clear unwillingness” by providers to comply with the law.

◆ Advisers do not adequately advise clients of their post-retirement product options and how essential it is that they preserve their capital so that it can generate an annuity for life, Bam says. – Mark Bechard.

❑ For a longer version of this article, visit www.persfin.co.za