Life policyholders ditched by insurance company
MORE than 5 000 people who took out life and illness insurance policies have been dumped by their insurance company, leaving them with little recourse unless the courts rule in their favour.
The policies – Prime Livinglegacy and Prime Living Covergrow – were sold by Prime Meridian Direct and underwritten by insurer Constantia.
However, policyholders were only informed about the unilateral policy cancellations at the end of February when they received an SMS saying their policies would be cancelled with effect from March 31 “due to regulatory changes” and urging them to “please don’t be alarmed”.
In the case of the Covergrow policy, a waiting period was imposed on disclosed, pre-existing health conditions, which in many cases was about to expire, or had just expired, when they received the policy cancellation news. The policyholders discovered in the days that followed that they would not get any of their premiums refunded. The elderly policyholders are now in danger of not being able to find alternative cover at all, given their advanced age. According to the information provided to the Financial Sector Conduct Authority (FSCA), there had been approximately 5 200 affected policyholders.
The Covergrow and Legacy policies were previously distributed as accident and health policies under Constantia’s short-term licence. The products were then marketed by Prime Meridian Direct, but the direct administration of these policies was taken over by Constantia in April last year. The matter is now before the Gauteng high court.
Lutchmiah Naidu and his wife Vijalutchmee, of Puntans Hill in Durban, both took out Prime Life Covergrow individual policies four years ago respectively, the latter paying R1, 499 a month. Naidu, at 69 and in good health, fears he won’t be able to find alternative cover.
“There are thousands of other people in a similar situation and it’s just not right,” said Naidu who took out a R5m policy in October 2016. Naidu said he would not accept a premium settlement of eight months as this was tantamount to corruption.
Iona, 69, and her husband Donald Feitze, 72, of Kloof, took out a family life cover policy in April 2015, paying R1 499 a month. After five years the policy is now worth over R1m.
PMD sales director Bryan Haarhoff said the unilateral cancellation of the policies was independently initiated by Constantia Insurance Company Limited in their capacity as the insurer.
The FSCA head of business supervision Kedibone Dikokwe said the engagements with Constantia questioned the insurer on the possibility of transferring these policies to the lifetime licence of the insurer. She said there was no basis for premium refund in the normal scope of insurance works. She said the cancellation of these policies were unique in the sense that it was linked to the conversion process with the Prudential Authority which is under way. Constantia’s legal manager James Aveyard said they were unable to respond as the matter was sub judice.