Ombud steps in when losses arise from a lack of advice
Broker could be at fault if you didn’t know key T&Cs
● Did you know that you may be able to get compensation for a repudiated insurance claim if your broker failed to properly explain the material conditions of your policy to you?
This may also be the case if an adviser recommends you replace one life policy with another and you later to find out you were switched to a policy with lesser benefits.
An analysis of complaints to SA’s financial advice ombudsman produces valuable lessons — and warnings for those tempted to dabble in cryptocurrencies or trading in foreign currencies.
There is also comfort for bank account users who fall victim to fraudsters in the latest report on complaints to the Ombudsman for Financial Services Pro-viders.
The report notes that 32% of complaints to the ombudsman last year were about insurance policies.
In many cases in which policyholders’ claims were repudiated the ombudsman found consumers were victims of bad advice when policies were sold without the material conditions being highlighted.
His findings led to many financial service providers or brokers settling the claims.
In one complaint a homeowner took out insurance with his bond in 1997. Years later he installed an outdoor pizza oven that caused a fire that burnt the family home down in 2014.
The insurer rejected the claim for almost R1.5m because the pizza oven did not conform to building practices, being too close to wooden rafters.
A condition of the policy on the home was that the building comply with regulations.
The bank that sold the policy said it was sold without advice, but Naresh Tulsie, the ombudsman until November this year, says in his report that financial institutions can’t just send you policy documents and claim they have complied with their duties under the Financial Advice and Intermediary Services (FAIS) Act. A code under the act requires them to make disclosures about material conditions in the policy.
The unnamed company involved conceded and paid a settlement of R800,000 — the maximum the ombudsman can award.
In another case, a business owner insured his business and personal assets including, he thought, his caravan and contents. Later another broker offered to review his cover and moved it to another insurer.
When his caravan was broken into, the man found his claim was rejected because the caravan contents were not covered.
The broker claimed it performed a simple transfer of the cover and the first broker should be blamed for not including the caravan contents.
But Tulsie says the broker should have identified the man’s insurance needs and analysed the appropriateness of the policy it recommended. This resulted in the broker settling the R25,000 claim.
In a third settlement recorded in the ombudsman’s annual report, another homeowner’s claim was repudiated because she had not occupied her house for 30 days before being burgled. She claimed she wasn’t aware the house had to be occupied all the time.
Tulsie asked the broker to prove it had made the woman aware of this material condition. The insurer was unable to do so and settled the claim for R165,000.
Bad policy replacements
Bad advice on life assurance accounts for more than 28% of complaints the ombudsman dealt with last year.
In his report, Tulsie identifies an increase in complaints about existing policies that are replaced with ones with lesser benefits.
The FAIS Act’s code of conduct says your adviser has to point out to you all the implications and consequences of replacing one policy with another.
Tulsie says the information brokers provide is often not enough to enable you to make an informed decision.
When an adviser suggests you switch one policy for another, they should not only give you a detailed comparison of the policies, but should also make sure you understand the policy differences.
Masthead says you should also be informed what impact your age and health will have on the premiums you will pay in future — could the policy become unaffordable in a few years’ time?
Robo advice
Another steadily growing cause of complaints that Tulsie identifies in his report is that arising when consumers buy financial products on online platforms.
Tulsie says that regardless of whether the online platform is a robo-adviser offering to advise you on, for example, appropriate investments, or whether it just gives you an opportunity to buy a product online, the provider must comply with the FAIS Act.
This means the company must make certain disclosures to you so that you can make an informed choice.
When a policyholder complained to the ombudsman about a claim on a medical insurance policy for her husband’s gastroscopy being rejected, the insurer responded that the condition was excluded.
The insurer claimed the policy was sold online without advice, but Tulsie said the exclusion should nevertheless have been pointed out to the policyholder. The insurer settled the almost R8,000 claim.
Banking complaints
Banks take the view that when there’s fraud on your account without a breach of the bank’s systems, it is as a result of your personal details being compromised and they aren’t liable for any losses incurred.
This is being challenged in court and the Financial Sector Conduct Authority has issued a draft conduct standard that includes provisions to ensure you are treated fairly when you are the victim of a cyberattack.
In the meantime, consumers who have complained about their banks’ failure to help them are getting some relief.
The ombudsman’s office has approached the banks on a number of matters, asking that in the interests of treating customers fairly, they use “their significant resources” to at least help clients in any further investigations so that they receive justice.