Ombud slams insurance brokers for giving you shoddy advice
need” is used by advisers as a way of circumventing the requirements of the code.
“By claiming that the client requires assistance only for a specific need, such as insurance for his new motor vehicle, advisers argue that there is no need to obtain all relevant and available information and, by extension, no need to conduct a needs analysis for the client.”
She also says there is a “disconnect” between the client’s understanding of comprehensive cover and the adviser’s understanding. By obtaining comprehensive cover for a vehicle, for example, the client may assume that everything is covered, including “extras” on the vehicle, such as a sound system or a bakkie canopy. But for many advisers, Bam says, comprehensive cover means cover up to the retail value of the vehicle, with extras not taken into account. Such extras are usually not covered unless specifically noted in the policy.
In another lapse of duty, advisers might ask clients whether or not they are paying off a loan on a vehicle, but “very rarely” offer or recommend top-up cover, “which often compromises clients if they make a claim in the early stages of the credit agreement”.
In the area of homeowners’ insurance, advisers and brokers tend to fail to disclose to clients the exclusions in their policies, Bam says in her report.
Exclusions are items that are excluded from cover under a policy or sets of circumstances under which cover is not provided. For example, damage to the structure of a house because of subsidence is often excluded, or only partially covered, in these policies.
Bam says the rejection of a claim that may run into many thousands of rands would be particularly devastating for young first-time homeowners. Another ongoing area of concern, Bam notes in her report, is advice on retirement planning.
“The decisions clients make at retirement are probably the most important financial-planning decisions they will ever have to make. The consequences of these decisions are, in most cases, permanent. For this reason, inappropriate advice can have disastrous effects on a client who is no longer economically active and is unable to make up any losses sustained,” the ombud says.
It is becoming more common, Bam says, for advisers to admit to shortcomings in the advice they provide, but then claim it is not possible to reverse the transaction.
“The impossibility of a reversal stems from the adviser having no power to place the client in the position he would have been in prior to the advice provided.
“Clients are told that reversing the transaction is impossible because of the unwillingness of the South African Revenue Service to cancel the tax directive. This explanation undermines the FAIS Act and the principle of Treating Customers Fairly,” Bam says.
martin.hesse@inl.co.za