A health risk?

08 May 2006 The FAIS Ombud

The FAIS Ombud has dismissed a complaint by a woman who claimed R800 000 as compensation because, she alleged, Old Mutual Life Assurance Company had failed to advise her late husband to buy adequate life cover.

After thoroughly investigating the complaint and eliciting information from all parties concerned, Charles Pillai, the Ombud for Financial Services Providers, ruled there was no basis for the complaint and that Old Mutual, in fact, may have made recommendations pertaining to life cover which the deceased rejected due to his concerns about the state of his health.

Marina Stain of Blackheath in Western Cape Province said in papers that Ted Baker, a financial advisor and representative of Old Mutual, had allegedly failed to advise her husband, Brian, of the need to purchase sufficient life cover while he was alive.

The couple was married in community of property. They had two sons, Ronald, an electrician, and Michael, a financial advisor.

Mrs Stain said her husband met Mr Baker shortly after he started his own panel beating business. Mr Baker remained Mr Stains financial advisor for 26 years until the former died on 9 March 2005 at the age of 61. Their last consultation was on 11 November 2004.

Mrs Stain said that apart from one life policy for about R54 000 purchased in August 1982, the only other financial products that Mr Baker had recommended to her husband were retirement annuities and endowment policies.

She said Mr Baker ought to have advised her husband to purchase adequate life cover. As a result of Mr Bakers failure, Mrs Stain said she would have to work longer as the retirement annuities did not provide sufficient income.

Mrs Stain alleged her husband was in sound health when they met Mr Baker during November 2004, thereby implying her husband would have qualified for life insurance had it been recommended to him.

Without any basis on how she arrived at the amount, Mrs Stain claimed R800 000 which is the maximum amount claimable within the jurisdictional limits of the FAIS Ombuds Office.

In its response, Old Mutual said Mr Baker had visited Mr Stain 25 years ago and life cover was discussed. During this initial meeting, Mr Stain felt that life insurance was not an option. Flexicare was also discussed with the deceased and he felt that his health would militate against it.

Old Mutual claimed that retirement funding was a priority for Mr Stain. Although Mr Baker had advised Mr Stain about the need for life cover in financial planning, his view was that he would not qualify as a result of his poor medical condition.

Mr Stain did not offer to elaborate when drawn to do so and Mr Baker did in turn not pursue what the condition was because of the deceaseds response.

While it is a financial advisers duty to give financial advice on appropriate products, the choice of product remains that of the client and a financial adviser cannot force a client to take out a particular policy if the client does not want to do that, said Old Mutual.

The FAIS Ombuds Office is precluded from investigating complaints in respect of financial services rendered before 30 September 2004. Thus the only portion of Mrs Stains complaint which could be probed was the meeting held on 11 November 2004 between Baker, Mr Stain and Mrs Stain. Mrs Stain alleged that it was at this meeting that Mr Baker had failed to address the question of life insurance, disability and income protector.

Mr Pillai said in his determination that from the papers before him, it was clear that the meeting on 11 November 2004 pertained to the signing of a premium increase for one of the deceaseds retirement annuities. Nothing else was discussed.

On the one hand Old Mutual maintains that the deceaseds reason for not wishing to pursue any advice relating to life cover was because of his own concerns about the state of his health.

Mrs Stain on the other hand maintains that the deceased was of sound health and there was no reason for an application for life insurance to be declined.

The deceaseds health is, therefore, a material consideration in determining this complaint.

The Ombud found that an examination of the deceaseds insurance portfolio supported Old Mutuals contention that he was only interested in providing for his retirement.

According to the Client Advice Record dated 21 May 2002, the needs identified on this document signed by Mr Stain and Mr Baker were more funding for retirement. Under Comments in the same document, it was inserted Client has life cover. Priority now is retirement funding.

The Ombuds Office inspected medical records from Mrs Stain and the deceaseds family doctor, Dr GS Muller Botha. According to the doctors report, the deceased suffered from hypertension and hypercholesterolemia; he smoked; he was overweight; he had a family history of heart disease; and he was on medication since 22 December 1999 for hypertension.

When the Ombuds Office requested information from Mrs Stain relating to the deceaseds medical treatment and death, she confirmed Dr Bothas report that the deceased suffered from high blood pressure and cholesterol.

Mrs Stain also confirmed that her husband had suffered from a viral infection during December 2004. He died of cardiac arrest on 9 March 2005. Further information elicited by the Ombuds Office reveals that the deceased was treated by eight different doctors between 20 December 2004 and 8 March 2005.

From the above it is clear that Mr Stain was, in all probability, not interested in purchasing life cover, as stated by Old Mutual and Mr Baker, due to his own concerns about his state of health, said Mr Pillai.

Attached to Dr Bothas report, a letter from Old Mutuals Medical Department dated 19 August 1999 and pertaining to an application for a life insurance policy for Mr Stain, states the application was rejected because of an abnormal electrocardiogram.

This attachment makes it abundantly clear that the deceaseds health status did indeed militate against life cover.  This aspect of the matter was never mentioned by Complainant anywhere in her correspondence and contradicts her statement that her husband was a healthy man, said Mr Pillai.

Old Mutual confirmed that apart from the above application for life insurance which was declined, no other applications for life insurance for Mr Stain were lodged with it.

When interviewed by the Ombuds Office, Mr Baker said risk planning was his most important speciality. Of the 48 cases he wrote between 1 January 2004 and 31 December 2004, 28 were Flexi/Conventional life policies, confirming his claim that my whole concern in the life industry always focused on life cover before anything else.

It is evident from all the above that whilst deceased may have qualified for life cover at some stage of his life, with the passage of time medical evidence may have caused him to appreciate that life cover was not an option. This does not indicate any failing on the part of Old Mutual.

When the financial service and advice were rendered on 11 November 2004, the deceased was, in all probability, not interested in life cover. On this basis alone, it can be said the complaint is without substance and I must dismiss it, Mr Pillai determined.

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