Insurers must probe your needs when selling you a policy

Insurers must gather detailed information from you so that the policy you are sold is appropriate for your needs. And they must draw your attention to any circumstances in which the policy will not pay out. These are requirements of the code of conduct under the Financial Advisory and Intermediary Services (FAIS) Act.

Noluntu Bam, the Ombud for Financial Services Providers, or FAIS Ombud, this week ordered Outsurance, a direct marketing insurer, to replace a complainant’s laptop or pay him R11 740 after she found that the company had not adhered to the code when it sold him household contents cover in 2013. The complainant, MB, added the contents insurance to his homeowner’s insurance after being telephoned by an Outsurance representative. It was the first time he had taken out such cover.

In March 2015, Outsurance rejected MB’s claim for accidental damage to his laptop, saying it had not been included in his household contents cover.

In its response to the ombud, Outsurance said that, during the phone conservation, MB had been advised that cellphones and laptops were not covered for accidental breakage under household contents cover. The insurer said he was told that items that can be removed from the house must be noted under allrisks cover.

“At no point did the complainant mention that he had cellphones or laptops, to enable the adviser to advise him accordingly,” Bam’s determination says.

In the determination, Bam says the transcript of the recorded conversation revealed that Outsurance’s representative had made very little attempt to solicit detailed information from MB that would enable the insurer to provide him with a product that was appropriate for his needs.

MB was applying for household contents insurance for the first time. But, Bam said, the recording indicated that the representative had not, as the code required, provided him with advice that took his “reasonably assumed” level of knowledge into account.

“The fundamental issue to consider when dealing with direct marketing is that the respondent is both in control of the conversation and, one would expect, more than familiar with the risks of an item being excluded due to it not being mentioned or listed by the complainant. This is not something within the complainant’s sphere of knowledge or expertise. The duty therefore rests on the respondent, as the expert, to appropriately inform and assist the complainant in this regard,” the ombud said.

The representative’s statement, towards the end of the conversation, that cellphones and laptops were not covered [for accidental damage] under household contents did not qualify as providing appropriate advice, Bam said.

At no stage of the conversation had it been made clear to MB that cellphones and laptops were covered only if they were noted under specified all- risks cover. This, Bam said, was a failure to adhere to the requirement that direct marketers must provide clients with concise details of any circumstances in which the benefits would not be paid out.