Complaints streaming in at the FAIS Ombud

The Office of the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud) has released its 2013/14 annual report which shows that the Ombud has faced a challenging year in which certain participants have tested the limits of the law.

The endless swarm of complaints

The Ombud is celebrating its 10^th anniversary, and has seen major changes in the way it deals with industry complaints. However, the growth in complaints is an issue of concern. In the 2005/06 year, the Ombud received 3 806 complaints of which 666 where referred to the courts. In 2009/10 there was a significant spike in complaints where the office received 7 647 complaints of which 2 653 were referred to the courts. While 2013/14 did see a decrease in complaints when compared to the previous year, the office still received 9 439 complaints of which 3 191 were referred to the courts.

The majority of complaints are from Gauteng at 33.13%, KwaZulu-Natal at 13.16% and the Western Cape at 11.21%. The Free State and the Eastern Cape both came in at just over 6% while Limpopo, Mpumalanga, the North West and the Northern Cape were all stable at just over 4% of complaints for each province.

The short-term industry was still the leading contributor with complaints of close to 3 000, while the long-term industry complaints where just over 2 500. Another area of concern is the investment sector which contributed close to 1 500 complaints. Both the retirement and the medical sectors did not even reach the 500 complaints mark.

In terms of performance, which relates to cases settled during the 2013/14 year, the Ombud dismissed 2 740 cases, it referred 4 999 cases to other bodies, it received settlements for 789 cases and it only handled 23 determinations. This is a significant decrease from the 33 determinations handed down in 2012/13.

Investment complaints are concerning

Abel Sithole, Chairman of the FSB Board, points out that important aspects for our young democracy are values of transparency and accountability as building blocks for good governance. “I am pleased to note that while concentrating on the main goal of resolving complaints, the FAIS Ombud has been mindful of the manner and the atmosphere in which those results have been achieved,” says Sithole.

For this, the Ombud received a clean audit award from the Auditor-General of South Africa (AGSA) in 2013 in recognition of its efforts in upholding good corporate governance prescripts and complying with the law.

“Having made it my business to understand the business of the FAIS Ombud, this kind of recognition from the AGSA is an indication that the entity is indeed maturing. While I remain concerned about the increasing number of complaints relating to investment related advice, I am pleased to note that the Office has resolved 8 551 complaints and returned R30 525 928 to consumers,” says Sithole.

The short-term industry still an issue

Noluntu Bam, Deputy FAIS Ombud, points out that the office of the Ombud has seen short-term insurance providers still struggling to make the mind shift and embrace the FAIS Act. “These providers, who clearly have been left behind, still continue to render financial services in complete disregard of their clients’ interest and the provisions of the FAIS Act,” she says.

She adds that many complainants claim they were not informed of the material terms of their policies. These include issues such as excesses, complaints that they are inadequately covered and complaints that policyholders bought what they believed was a policy with a cheap premium only to face high excesses at claim stage. The other complaint related to cheap premiums which come with cover that is totally unsuitable to the client’s situation.

While the responsibility of product disclosure and explanation rests with the broker, Bam says that there is an increasing focus on the proactive role the client needs to play. Clients need to conduct a background check on the products that are being sold to them. "The findings of the Office are by no means a one way street of upholding complaints against brokers. This was evidenced by our statistics in the 2013/14 financial year. Out of the resolved complaints, 789 complaints were settled and 2740 complaints were dismissed," concludes Bam.

Editor’s Thoughts:
The performance of the Ombud during the year is encouraging for the industry. There seems to be an increasing element of pragmatism that is being taken when dealing with complaints. While the number of determinations is still high, the number of cases being dismissed suggests that there are a number of people trying to take a chance, and the Ombud is protecting the industry against these people. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].

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