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Momentum: Is it the right decision?

21 November 2018 Jonathan Faurie

Momentum made headlines when it was reported in the media that the company would not be paying out a claim made after the death of Nathan Ganas who died after being shot in a hijacking.

There was a significant public outcry from clients and consumers with many accusing Momentum of looking for a reason not to pay out a claim. However, the reality of this case was that there was non-disclosure which was brought before the Life Ombud.

Educating the nation
From the public outcry, it is clear the clients and consumers do not necessarily understand the ramifications of non-disclosure. 

And although Momentum made a clear attempt to uphold the rejection and use the opportunity to educate consumers about non-disclosure, the pressure they faced was immense and they had to consider reputational damage.

A word from Momentum
News broke, yesterday, that Momentum agreed to pay the claim (and others) and the following press release was issued.

It is clear from market reaction over the last two days that under certain circumstances, current industry practice creates the impression that insurers are looking for reasons not to pay a claim. Momentum is in the business of paying claims and we have therefore taken the criticism to heart. We have created a solution that will pay an amount equal to the death benefit (limited to a maximum of R3 million) in the case of violent crime, regardless of previous medical history. This will apply to all existing as well as future life cover clients. 

Key points to take note of:

  • This payout will be fully funded from Momentum’s profits and not from our clients’ premiums;
  • The guarantee will pay out when the death was a direct result of violent crime, even when material medical non-disclosure impacts the legitimacy of the contract;
  • The payout is not in addition to the normal death benefit. It only applies in circumstances when the death benefit will not be payable or has been reduced;
  • Momentum reserves the right to reject any fraudulent claims. 

The guarantee will apply immediately to all our life cover clients and will be applied retrospectively. We are identifying clients who were impacted in this way and we will contact their families to arrange payment. This includes Mrs Ganas. 

The importance of full and honest disclosure at application stage cannot be overemphasised. 

The only time your health status matters, is when you apply for cover. This is when you need to share all your medical and health information. If your health deteriorates after commencement of the policy, there is no need for you to inform Momentum – your claim will be completely valid if the information provided at the start of the policy was accurate.  

With exception of the new guarantee, full disclosure remains non-negotiable to ensure peace of mind. 

We care for our clients and always strive to solve for their needs. We hope that this solution illustrates that. 

Editor’s Thoughts:
The new solution that Momentum has come up with is innovative and will no doubt disrupt the industry in a good way. But do you think the decision to pay out the Ganas claim was the right decision to make? Please participate in our poll related to this issue. Please also comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Vie, 23 Nov 2018
It was the right decision. One of the policy terms of Momentum is that they won't pay if the matter of non disclosure is related to the cause of death. In this case it was not related, therefore in order to treat customers fairly they must pay.

Secondly, I would also want to know how they will treat deaths from accidents. I think these should all be included.

Thirdly, what will stop someone who has diliberately withheld medical information and goes to areas where they know there's crime in order for their claim to be accepted.

This might result in unintended quenceqounces. Resulting in high claims experience and high cost of insurance.
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Added by Ayanda, 22 Nov 2018
Once again in our country, we have state officials, this time from treasury, condoning, directly encouraging and wishing to reward malign dishonesty. Indeed, the fellow concerned thinks Momentum's very silly buckling under popular pressure is actually good and that more ways should be found to "treat customers fairly"!
Perhaps he is best be advised to first seek advice on the likely consequences hereof. More blatant dishonesty, mpore lying with impunity, more pressure on insurers to pay illegitimate claims such as this one leads to treating ALL current and prospective customers much more UN-fairly. The only possible consequence of over-throwing the well established law like this, is that premiums will rise and more people will find it harder and harder to get life assurance at all.
How about "treating insurers fairly" for a change?

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Added by Andre, 22 Nov 2018
Being in the industry for 38 years, I do understand why there should/could not have been any life cover in this case and therefore no payment should be made due to non-disclosure...thats the rule. This will create a monster in the industry, not only for life cover, but also disability cover.
A contract stay as contract and it is the responsibility of the assured to read through his contract and avail himself of the rules and regulations that accompany it.
This is nothing but emotional blackmail and it is a pity that Momentum has given in to it, in the process placing the intermediary immediately under suspicion of not doing his/her work properly.....that is BS, no proof of that.
Honesty is always the first price...!
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Added by Kammy, 21 Nov 2018
To all those saying that paying was the wrong decision, would you say the same thing if it was your father or son who was the one killed? Whilst legally the response may be correct, we need to challenge it from an ethical and moral perspective. How do you justify not paying out when the death was caused by something unrelated? If the death was as a result of the high sugar levels I can understand the approach but not otherwise. As an industry we need to start thinking differently about these cases. I hear the argument saying its too expensive to conduct tests upfront, but again, whats motivating that? Profit? If we are finding that we cannot do proper underwriting we need to put the measures in place to ensure we have all of the facts. Where we pick up clients lying, we need to communicate openly with clients on pitfalls. I have yet to see any insurer communicate with a client and say we are picking up the following trends and hence are declining claims. We have been speaking TCF for 10 years now, yet the changes I see are still superficial.
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Added by David Thomson, 21 Nov 2018
Making use of a professional financial planner from the start would probably have saved both the client and the insurer a lot of trouble. This decision has serious implications for the entire industry and may have opened the floodgates for public opinion to define' disability'; define 'dread disease severity' and a host of other issues. People- all this means is that re-insurers will increase the cost of cover. So we all lose expect Mr. G's spouse.
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Added by marcus visser, 21 Nov 2018
It is not about right or wrong but what is FAIR. This is the age of consumer activism and companies like Momentum cannot be seen to run roughshod over consumers...the backlash caught them by surprise and they paid the price for it. By the way, is this not the purpose behind TCF regulation? Life companies still have a long way to go to get this right it seems.
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Added by Laurence, 21 Nov 2018
Why Momentum pays from "profits" and not from the "pool of reserves" made of premium contributions? Is the insurer allowed to make a profit from their underwriting operations? What is the Financial Sector Conduct Authority (FSCA) says? and if its allowed, means insurer can at anytime increase their reserves from a 3rd party, like bank loan?
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Added by Tony Harper, 21 Nov 2018
Its time that the industry separated death benefits from a health related matter and death benefits from accidental death due to violent external factors.

The client has some control over their health (ie non smoking and blood test) to qualify for discounts in the health risk premium. However the accidental risk premium is an actuarial number that is not directly related to the clients health or age and should be an automatic payout.
I note that the non underwritten accidental death offering by Momentum is limited only to a direct violent crime. What about a death claim due to a car accident?
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Added by GAVIN CAME, 21 Nov 2018
The challenge here is that non-disclosure is rewarded. It is very glib to say that this is a positive "game changer".It's not! Insurers for century's have relied on insurance being an uberrime fide contract, ie utmost good faith. The reason for this is that in relation to the risk being run by the assurer their is a knowledge gap. The insured knows a lot more about his state of health (or in the case of short term insurance the risk to his assets) than the insurer. At the same time the insurer is assuming a disproportionate risk. i.e. client could pay one premium of say R1,000 and the insurer may have to pay many millions if the claimable event happens. If we now back off from this principle and say its OK for the client to lie, this transfers further risk to the insurer. This risk has to be priced into the rates, which means the whole customer base of the insurer carries a higher charge. Lets say the other insurers do not follow Momentum's route and stick to their guns. Momentum's rates will go up and people wont buy cover from them anyway. Bottom line: Its populist and wrong to allow clients to lie on an application form
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Added by Ayanda, 21 Nov 2018
No. A VERY big mistake to reward and encourage yet more (malign?) material mis-representation and social media populism.
Their first decision was legally AND morally correct - and is supported by much case law here and abroad.
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Added by John, 21 Nov 2018
If you listen to the radio interview with the wife, and read the FAQ from Momentum, it is very clear that he his intention was to be dishonest on the application. All the medical questions were answered "no" on the application (per Momentum FAQ). Yet, 3 years prior, he was admitted to hospital with chest pains, multiple tests ECG etc done, and the diagnosis was work related stress (per his wife on the talk show). On the Momentum application, there is mental health question, with "stress" as one of the conditions to be ticked (Q5.9), there is a question re medical advice received in the last 5 years or medical tests/exams such as ECG, (Q11.1). There is a heart question with "chest pain" as an option to tick (Q1.9). All answered no.
And of course the infamous "diabetes" (Q8.4) or "rasied blood sugar" (Q8.5) questions.

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Added by M Hendricks, 21 Nov 2018
Although I empathize with the claimants, I think it's a mistake rewarding for non-disclosure. Momentum is setting a precedent because in my view violent crime don't always result in death, what about resulting in disability or mental breakdown, shouldn't they also make a payment?
All necessary test should be done from now on.
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Added by Paul, 21 Nov 2018
Poor underwriting to start with,cleared for cover based on the application only?
I think MOM needs to stop using U/W technology and read between the lines as it were and then ask some more questions before issuing cover.
Possibly some good PR comes out of this.
Previous comments from readers are all valid as well,in my opinion .

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Added by Truth, 21 Nov 2018
No. The client lied about his high blood sugar!(non-disclosure at application). The death benefit would have been declined at application stage and therefor he would not have this cover in the first place to claim against. Even if he died now because of an unrelated event the policy should not have been accepted but unfortunately Momentum did not know. So the policy issued because Momentum did not know about this issue and they also did not asked for 'n sugar test because he indicated there was no problem. To test for high blood suger may not cost a lot but to test all clients will! What I don't understand is why Momentum start with a "new" benefit suddenly just because of this claim and play nice to pay out other related claims? Do they see it as an opportunity for new business or to please the crowd? So Momentum say "If you lied and we find out at claim stage (at claim stage Momentum asked a questionnaire to be completed by your GP) and you have died because of violence, we will pay!? This surely don't make sense!! The cover should NOT issue at application stage if your health is uncontrolled or a high risk, doesn't matter how you die in the future even if the reason of death is from the outside like violence! No this is not fair!!
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Added by Manie Geldenhuys, 21 Nov 2018
We live in a country rife with corruption and lawlessness. This case went to the ombudsman as well and Momentum should have stuck to their decision. Another Victory for Dishonesty.
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Added by Nicky, 21 Nov 2018
Joe Public need to understand that if you lie, your claim will be repudiated. Simple. I am unsure how Momentum discovered that there was non-disclosure, but the fact of the matter is that there was. Could this have been a veiled suicide? We will never know. What is clear, is that there is no claim for non-disclosure, unless..... Bowing to public pressure is the wrong move in my opinion. Clearly Joe Public has little understanding of the consequences of dishonesty.
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Added by leirel, 21 Nov 2018
No. The policy was issued in good faith and the conditions of the contract are clear as far as non-disclosure and misrepresentation are concerned, momentum should have stuck to their initial decision.By bowing to public pressure they have set a dangerous precedent
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Added by Shaun Hickson, 21 Nov 2018
I agree with Piet Swart. It is well known that high sugar,diabetes is a huge health issue in our country , therefore a simple glucose test should be mandatory to each new applicant. Insurers that underwrite at claim stage will eventually be punished .
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Added by story masiyiwa, 21 Nov 2018
Momentum has now exposed themselves to fraud. I believe they should have paid made an ex gratia payment from the beginning. Now to say they have created a fund for dubious claims defies all logic not only for Momemntum but for all life offices in RSA and the region. We are watching this case with lots of interest in Zimbabwe. If I may add AIRMIC has in the past encouraged insurers and risk managers to consider each case on its merits rather than blindly invoke the non-disclosure clause blindly.
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Added by Jacky, 21 Nov 2018
I think there is no right or wrong answer to this one. I do however believe that what the public completely missed is that if the disclosure was made, no policy would have existed in the first place. This is going to disrupt the industry and not necessarily in a good way as new measures will have to be put in place to prevent future deliberate non-disclosure and encouragement of clients to "arrange" for a violent death i.e. veiled suicide... Also, if we as insurers are going to be forced by an uninformed public and media to reduce our Risk rating categories etc. policies will become un-affordable and wealth creation and protection will no longer be available to everybody. If we "sharpen" our diligence regarding this, it will also negatively impact premiums as companies will not be able to afford additional measures. This incident should highlight the need for consumer education regarding risk cover.
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Added by Nursee Parannath, 21 Nov 2018
Momentum's payment: A tricky question:
No and Yes

No:
Consumers should be aware of the ramifications of non disclosure, misrepresentation and other factors that may affect a risk on ANY type of insurance product. Consumers are partly responsible for high premium rates, in view of the above.

Yes:
1.This was an unusual situation that required a more measured response - the reputational damage affected not only Momentum, it damaged the industry, more especially the sales staff..
2. It should be a lesson to ALL insurers to be particular about underwriting - in order to gain sales and market share, AND SAVE COSTS shortcuts are taken, thus with the advent of technology, social media and like - UN-examined bad news spreads fast.
3. There must some weakness in the sales process, which the general public is not aware of, meaning the actual communication between the Momentum consultant/broker/agent/adviser AND the client.
4. Call center operators and their principals should note that the general public do not understand most financial products. The center's disclosure commentary leaves a lot to be desired. Even worse is the question and answer process which is normally rushed and misunderstood by both parties.
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Added by Jacques , 21 Nov 2018
No Momentum made a big mistake handled the case wrong should have made a correct decision from day one should not back track because of media pressure. Why did they investigate in the fists place it was a violent crime.
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Added by Sandra Cronjé, 21 Nov 2018
I am glad that Momentum decided to pay out the claim. I agree with Micheal. If he died because of diabetes or something related to that sickness, I would understand the non-payment of the claim. But he died from something that wasn't related to anything medical. It is unfair to repudiate a claim because of something that has nothing to do with the reason for death.
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Added by Piet Swart, 21 Nov 2018
Apparently Momentum do underwriting at claim stage instead of at application stage which with medicals etc. the condition would have been picked up then instaed of later. Not sure if this is correct so if anybody can comment I would appreciate.
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Added by Humphrey, 21 Nov 2018
I work in the short term insurance industry and there the non-disclosure must be material. The life side seems to be different and I just wonder about the fairness of it not having to be material to deny claims.

To make a statement that it will come out of profits and not from consumer premiums is questionable in my mind. Now that they are setting this precedent, certainly going forward shareholder's ROI expectations need to be satisfied and this ultimately must surely come out of premiums (especially at times when investments are not delivering great returns - we are currently in one of those cycles).

Is this being done because they really are pro-consumer or is it because of the negative media and negative consumer sentiment following these articles.

In the short-term industry we have had a couple of direct insurers (or are predominantly direct) who have policy wordings that have excluded cover that would otherwise have been covered by the traditional insurers that operate through intermediaries / brokers (one of the problems with not dealing through a broker). Examples being earthquake damage due to mining operations. When there was such an earthquake - again due to negative media publicity and consumer sentiment - these direct insurers turned around in the media and said a similar thing that they care for their clients and would pay the claims. If it had not been such a large quake that caused so much destruction and received so much media attention would they have paid?

On the short term side I still say it is still best to use a broker and make sure it is a good one.
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Added by frederik van zyl, 21 Nov 2018
No it was not the right decision to pay the claim.The client
lied about his medical condition which he was fully aware of.
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Added by frederik van zyl, 21 Nov 2018
No it was not the right decision to pay the claim.The client
lied about his medical condition which he was fully aware of.
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Added by Nicolaas Fourie, 21 Nov 2018
Mistake
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Added by Michael, 21 Nov 2018
Yes , absolutely ,notwithstanding the non-disclosure of high blood sugar, the deceased died from gun shot wounds. If the client had died from diabetes or a condition related to his non-disclosed high blood sugar then I would agree that Momentum should repudiate the claim. The take away from this is that IFA's and clients need to make full disclosure even if it does not seem material at the time.
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Added by nico van der hoven snr, 21 Nov 2018
No. The possibilty of not granting cover or at least at sub-standard rates at inception was highly probable. There should be no reward for non disclosure. Unfortunately we live in a society where populist opinion has become the norm.
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