Failure to honour claims
In a recent determination by the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud), the complainant seeks an order compelling the respondent to indemnify him for the costs of repair to his vehicle.
The complainant in this matter, Davin Govender, is one of a number of policyholders who
lodged complaints with the FAIS Ombud following the respondent’s failure, Pieter De Wet, a sole proprietor who conducted short term insurance business under the name Model Insurance, to honour their claims.
We summarised the determination for you but you can download the original determination here.
The complainant’s complaint
During April 2013, Govender entered into a comprehensive short term insurance agreement with De Wet. De Wet furnished a confirmation of insurance containing the policy number to Govender. The policy incepted on 22 April 2013, and Govender who had been assured of immediate cover, cancelled his previous insurance policy.
On 29 April 2013, Govender was involved in a motor vehicle accident with his 2007 Z4 BMW. The damage sustained to the vehicle amounted to R97 776. He duly reported the matter to the South African Police Service (SAPS) and instituted a claim with De Wet.
The claim was rejected by the respondent on 29 May 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.
Govender confirmed that he had never been informed of this exclusion as he had been assured that the cover was provided immediately and subsequently cancelled his previous insurance.
Aggrieved by De Wet’s failure to honour his claim in full, Govender lodged a complaint with the Ombudsman for Short Term Insurance (OSTI) who in turn referred the complaint to the FAIS Ombud.
Govender seeks an order compelling De Wet to indemnify him for the costs of repair to his vehicle.
The requested response
The complaint was sent to the respondent requesting him to resolve it with the complainant, alternatively to furnish the FAIS Ombud with a detailed response. De Wet failed to address the Office on the merits of the complaint. Subsequent thereto, the complaint was formally accepted for investigation in terms of Section 27(4) of the FAIS Act, and De Wet was again invited to file a response to the complaint. He failed to respond.
Having received neither the requested response nor the supporting documentation, the matter, according to the Ombud, is determined on the basis of Govender’s version. From the history of matters determined by the Office on prior occasions, the FAIS Ombud states De Wet has no defense against the allegations made against him.
Under false pretense
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. Despite this warning, De Wet continued to conduct unregistered insurance business. The Registrar reported the respondent to the Commercial Crime Branch of the SAPS and secured an interim interdict in the Kwazulu-Natal High Court to stop De Wet from carrying out short term insurance business.
The determination
According to the FAIS Ombud the transaction concluded between De Wet and Govender was a replacement of previous insurance held, and as a result De Wet was required to comply with the General Code of Conduct for authorised financial services providers and representatives.
There is no evidence, according to the FAIS Ombud, that De Wet complied with the Code, specifically with the requirement that the recommendation be appropriate for the circumstances of the complainant.
The FAIS Ombud states that allowing Govender to replace an existing policy with a policy that excluded any claims within the first three months, effectively rendering Govender uninsured, cannot be seen to have been appropriate or in the best interest of Govender. De Wet, the FAIS Ombud says, therefore failed to ensure that his client understood the advice and failed to treat him fairly.
According to the FAIS Ombud, had De Wet adhered to section 8 (1) (d) (ii) of the Code, Govender would have been aware of the exclusion of cover during the first three months and therefore in a better position to make an informed decision about cover.
Furthermore, De Wet misrepresented to the public that he was an authorised short term insurer and financial services provider. He rcollected 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 Govender.
Govender seeks payment of the amount of R97 776, based on a quotation furnished to him by the panel beaters. De Wet is hereby ordered, by the FAIS Ombud, to pay Govender the amount of R97 776.
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. In many ways, this shows that tighter controls are needed to bring in 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].
