FAIS Ombud gets creative with split determination
Late last week the FAIS Ombud issued three more determinations which further clarifies how the Act will be applied going forward. Because many of our readers operate in the short-term insurance environment FAnews Online decided to take a look at a case which involved, among other things, an incomplete proposal form.
Any insurer reading the facts of this complaint should note the following. First, it pays to make telephone recordings of all interactions with clients that involve or lead to an insurance policy being put in place. And second, that it’s always better to ensure the client completes the entire proposal form – and signs it…
Finding the respondent 70% guilty
The first case involves short-term insurance broker Killian Insurance (the Respondent) and More Flowers CC (the Complainant.). More Flowers (represented by Grazia Maia purchased a bakkie and faxed an incomplete proposal form to the Respondent. Information provided by Maia included the name of the insured and bank details. On 23 May 2006 a claim was lodged with the insurer following theft of the vehicle. This claim was subsequently repudiated by South African Underwriters on the basis of non-disclosure of previous losses.
And this is where things get interesting. After the claim repudiation both Complainant and Respondent refused to accept responsibility for the incomplete disclosure. The Complainant said that Celeste Botes (employed by the Respondent) had intentionally misled the insurer on the no-claims period to ensure a lower premium. Botes in turn alleged that Maia had left that portion of the proposal from intentionally blank, and had supplied incorrect information when telephoned to provide it. What was clear from the evidence was that the no-claims section of the proposal had been filled in by the Botes.
This case could have been easily resolved had the Respondent kept voice recordings of the transaction. However, when requested by the Ombudsman to supply such records, the Respondent said “it was not aware of any statutory provision which required the recording of any material for the issue of an insurance policy.” Respondent felt this practice was usually employed by a broker as a safety measure only. Unfortunately this was the wrong answer.
Voice recording a part of the general code
Respondent’s failure to implement a voice recording system was negligent. The FAIS Ombud noted that the General Code of Conduct for Authorised Financial Service Providers was clear on this point. It states: “a provider must have appropriate procedures and systems in place to record verbal and written communications relating to a financial service rendered to a client.” And it further outlined that “no provider may in the course of the rendering of a financial service request any client to sign any written or printed form or document unless all details required to be inserted thereon by the client or on behalf of the client have already been inserted.”
The FAIS Ombud took exception to the Respondent’s defence in this case. He believed that the Respondent, as a licensed provider in terms of the Act, should have shown a better grasp of the basic provisions of the FAIS Act. He was also quick to point out that the Respondent showed “no discomfort” in accepting an incomplete form and later filling further details on the form. Those familiar with previous FAIS Ombud rulings will already have an idea where this case is headed.
Dishing out the blame
The latest FAIS Ombud ruling departs from the conventional ‘right or wrong’ approach to assigning blame. He decided that on the basis of the evidence supplied the Complainant’s version of events was more correct. However, he also felt the Complainant shared some of the blame in the matter. Since the Complainant had previous experience of insuring motor vehicles “she must surely have known that it would have taken a lot more information to insure the vehicle than simply providing the name of the insured and bank details,” he said.
So, like wise King Solomon who proposed that a child be cut in two to get to the bottom of a paternity claim, the FAIS Ombud employed ‘fair’ justice and ordered that Respondent and Complainant share the blame. And of course this means the insurance broker is out of pocket. “The Ombud ruled that it would be equitable that Complainant’s claim be upheld to the extent of 70% of her loss.”
This loss would comprise the bakkie’s insured value of R66 980 less any reasonable adjustments that would have been made had the insurer paid out on the basis insurance was properly in place.
Editor’s thoughts:
As we mentioned in the opening paragraph the insurance broker could have avoided this problem had a telephone recording system been in place and the proposal form been completed in full by the client. Do you agree with the FAIS Ombud’s decisions to share accountability in this case? Add your comments below or send them to [email protected]
Comments