Bringing the wrongdoers to light
What is sometimes presented as a safe investment can turn out to be nothing more than a scheme that can leave an investor destitute.
This was yet again the issue in the recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud).
An exclusion missed
During June 2013, the complainant, David Jackson Mbetse, entered into a comprehensive short term insurance agreement with the respondent, Pieter De Wet, a sole proprietor who conducted short term insurance business under the name Model Insurance.
The policy incepted on 26 June 2013, and Mbetse, who had been assured of immediate cover, paid a pro-rata premium for the remainder of June 2013.
On 1 July 2013, Mbetse was involved in a motor vehicle accident with his 2012 Mercedes Benz C180. The damage sustained to the vehicle was quoted as having been R172 145, and he duly instituted a claim with De Wet.
The claim was rejected by Model Insurance on 4 July 2013, claiming that the terms and conditions of the policy do not provide benefits for claims submitted within the first three months of the policy. The respondent in its letter to Mbetse, does not refer to the specific provision relied upon.
Furthermore, and despite numerous requests by Mbetse, no policy documents in support of this provision have been provided. He also confirmed that he had never been informed of this exclusion. In addition to not having been provided with a copy of the policy wording, he had been assured that cover was provided immediately.
Aggrieved by the respondent’s failure to honour his claim, Mbetse lodged a complaint with the Ombudsman for Short Term Insurance (OSTI) who in turn referred the complaint to the Office.
Mbetse seeks an order compelling the respondent to pay him an amount of R172 145, which is what he paid to have his vehicle repaired. He provided proof of both the quotation for repairs and payment made by him in lieu of the repairs to his vehicle.
Failure to resolve the matter
Mbetse was sent to De Wet, requesting him to resolve the matter with Mbetse, alternatively to furnish the Office with a detailed response. De Wet failed to address the Office on the merits of the complaint.
Having received neither the requested response nor the supporting documentation, the matter, according to the FAIS Ombud, is determined on the basis of Mbetse’s version.
From the history of matters determined by the Office on prior occasions, the FAIS Ombud says it is clear that De Wet has no defence against the allegations made against him.
Hidden skeletons in the closet
The determination is made in terms of the Financial Services Ombud Schemes Act (FSOS) read with section 28(1) of the FAIS Act. According to the Ombud, Mbetse in this matter is one of a number of policyholders who lodged complaints with the Office following Model Insurance’s failure to honour their claims.
De Wet held himself out to be an authorised short term insurer and collected premiums from members of the public. It emerged from enquiries with the Registrar that De Wet had never been licensed in terms of Section 7(1) of the FAIS Act to render financial services to the public. He had also never been registered to conduct business as a short term insurer as required by Section 7 of the Short Term Insurance Act (STIA).
During February 2012, the Registrar issued a warning, requesting the public not to conduct business with Model Insurance. The Registrar reported De Wet to the Commercial Crime Branch of the South African Police Service and secured an interim interdict in the Kwazulu-Natal High Court to stop him from carrying out short term insurance business. Despite this warning, De Wet continued to conduct unregistered insurance business.
The FAIS Ombud’s findings
According to the Ombud, De Wet misrepresented to the public that he was an authorised short term insurer and financial services provider; he collected premiums from members of the public but had no financial means to honour claims as they arose.
Although De Wet was not a registered short term insurer, he entered into a binding short term insurance agreement with Mbetse.
In terms of the short term insurance agreement, De Wet agreed to indemnify Mbetse against any loss or damage arising out of the use of his vehicle at a monthly premium of R771.58. De Wet, despite the unsubstantiated claims of a three-month exclusionary period, was at risk and liable to pay Mbetse in terms of the contract of insurance.
Based on the issue at hand, De Wet, according to the FAIS Ombud, is liable to pay Mbetse the amount of R172 145.
Editor’s Thoughts:
The actions of the respondent, in this situation, were a major contributor of this determination handed down by the FAIS Ombud and rightfully so. A wise lesson to learn. In many ways, this shows that tighter controls are needed to bring in the bad books or rather the wrong doers in the most appropriate manner. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
I agree, stricter laws and severe consequences should be put in place for perpetrators. Report Abuse