FAIS Ombud determination: be diligent and treat clients fair
Consumers rely heavily on the expertise and trust of a broker or an industry expert in order to give them the best advice.
Despite the number of determinations that the Financial Advisory and Intermediary Services Ombudsman (FAIS Ombud) handled last year, there are still a number of clients who are being taken advantage of.
This was the basis of the most recent FAIS Ombud determination about the undue cancellation of a policy. The case is between Mr Kgabo Posch Molokomme (hereafter referred to as the complainant) and Mr Wayne Duval (hereafter referred to as the first respondent) who allegedly failed to render financial services with care and diligence.
Throughout the dealings with the complainant, the first respondent represented the second respondent, Quanway Insurance Brokers CC.
Trust issues at hand
On the 24th of November 2006, the complainant purchased short-term insurance cover for his vehicle through the first respondent. The policy had a renewal date of 24 November 2007 with monthly premiums of R696.95.
In March 2008, the complainant was involved in a car accident. As a result of that accident, substantial damage was caused to his vehicle. Following the accident, the complainant called the respondent’s offices to notify them. On 5 March 2008, the complainant received a call from the respondent who promptly informed him that his insurance premiums had been outstanding since November 2007 and that he was no longer insured with Constantia Insurance Company Limited, (Constantia), the insurer he had originally contracted with.
On the same day, an agreement was reached that the complainant would pay the sum of R3 000 into second respondent’s bank account, to make up for four months unpaid premiums. The complainant paid the R3 000 as directed.
Having not heard from the respondent since the payment was made, the complainant decided to make a call to Renasa for progress, only to be told by a Colin Scott that Renasa is not aware of such an arrangement. The complainant then realised that the first respondent had been lying to him all along.
Alarmingly, the respondent simply advised the complainant that he was acting as the insurer and that from that point onwards he (as the respondent) would handle the claim himself but would follow what the insurer would have done.
The respondent apparently went on to inform the complainant that he would obtain quotes and repair the complainant’s vehicle, noting that he would also pay for storage. The respondent repeatedly reneged on his promises, leaving the complainant with no option but to lodge a complaint with the FAIS Ombud.
With no cogent explanation from the respondent as to what happened to the complainant’s insurance arrangement, the complainant’s search for the truth uncovered that the respondent had unilaterally and unlawfully cancelled his policy with Constantia sometime in November 2007.
Fighting resistance
Through interaction with various bodies and individuals, the complainant established that the respondent transferred all his clients to Renasa Insurance Limited (Renasa). No explanation was provided by the respondent as to why the complainant’s insurance arrangement was not transferred to Renasa.
The complainant’s efforts to have his claim resolved were met with resistance by the respondent. On the 13th of August 2008, the FAIS Ombud requested the respondent to file his response or resolve the matter with the complainant. To date no further communication has been received from the respondent. The respondent clearly has no intention to resolve or assist the FAIS Ombud in resolving the complaint.
Determining factors
The issues to be determined are whether the respondents failed to act honestly, fairly, with due skill, care and diligence, and in the interests of his client and those of the financial services industry.
In reaching the findings, the FAIS Ombud considered the undisputed version of the complainant and information obtained from the complainant’s erstwhile insurers. It should be reiterated that upon receipt of the complaint, the FAIS Ombud requested and invited the respondent to give their version to which no response has ever been received.
This shows poor behaviour towards the FAIS Ombud. When the respondents cancelled the policy, they had no mandate from the complainant nor did they attempt to seek such mandate. It can thus be concluded that the cancellation could not have been in the complainant’s interests.
Had the respondent diligently followed the move with a reconciliation exercise, he would have noted that the complainant’s insurance was not with the new insurer and acted accordingly. Not only was the respondent’s conduct void of care and diligence, it also undermined Part II, Section 2 of the General Code of Conduct, (General Code). The respondent was neither concerned with the Code nor with his client’s rights when he cancelled the complainant’s insurance.
Final ruling
Regarding the damage caused to the complainant’s motor vehicle, the FAIS Ombud is prepared to award the complainant a fair and reasonable amount of compensation for his damages.
The complainant seeks the amount he would have been indemnified with by the insurers, had it not been for the unlawful conduct of the respondent of unilaterally cancelling his policy with Constantia. In his claim the complainant included an amount of R22 000, being storage fees and the undisputed payment of R3 000 into the respondent’s account.
The FAIS Ombud determination was made on the grounds of inadequate and improper advice from both the insurer and broker.
The FAIS Ombud held the broker and the insurer firm jointly and severally liable to pay their client his entire investment which was lost. The respondents have been ordered to pay the amount as follows: R49 700 (reasonable amount representing damage to the vehicle) and R3 000 (amount paid to the respondent after the claim was lodged) R52 700.
One false move and your reputation is gone
Anton Swanepoel, Co-Founder of Cutting Edge Business Solutions, recently pointed out that when a determination is being investigated, the broker is given six weeks to send a response to the Ombud on the allegations made by the client. “The broker needs to cultivate a good business relationship with hundreds of clients, successfully executing thousands of transactions. It only takes one complaint to the Ombud to put the broker’s reputation at risk.”
It is surprising how many brokers do not send any response to the Ombud. While this may unconditionally point to guilt on the part of the broker, the Ombud still has a duty to investigate the allegations on a broader basis. However, Swanepoel has little sympathy for brokers who do not submit a response to the Ombud, and are then found guilty. “These brokers should be debarred from the industry and not be allowed back in,” concluded Swanepoel.
Click here to read the full determination
Editor’s Thoughts:
Clients tend to do business with brokers who care about them and go the extra mile. It is often said that if you truly care about your clients, they will care about you. It is important that brokers offer this type of treatment at all points of the transaction, in order to build long-term relationships. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments