FAIS Oombud says too many Ombuds are bad for the industry

In a ruling in which he criticised the way in which the Ombud for Short Term Insurance (OSTI) changed his stance on a complaint, the FAIS Ombud has said it is clearly not in the interests of the consumer and the financial services industry to have a glut of Ombuds.

Charles Pillai (pictured), the Ombud for Financial Services Providers, said the vacillating by the OSTI in resolving a certain complaint only highlighted the frustrations faced by the average consumer when trying to obtain relief due to the “jurisdictional minefield” of the various Ombud schemes.

In the complaint under scrutiny, the OSTI initially disagreed with an insurer who refused to pay on an accident claim on the basis that a tracking device showed the driver had been negligent by driving at an excessive speed.

The OSTI’s initial view was that insurance was supposed to “provide cover for such negligent conduct”.

However, for some unknown reason, the OSTI subsequently changed his stance and supported the insurer’s rejection of the claim.

The OSTI then went further and informed the complainant that she appeared to have a potential complaint against the intermediary and suggested that she contact the FAIS Ombud for assistance in this regard.

Pillai said in his determination that he had to exercise jurisdiction over the insurer in terms of the FAIS Act even though the OSTI apparently did so within the framework of his own terms of reference.

Commenting on the confusion that exists in what he described as the “Ombud market place”, Pillai referred in his determination to remarks he made in his 2006-2007 Annual Report where he stated:

“Linked to consumer confusion caused by lack of awareness is the blurring of the lines that distinguish the areas of jurisdiction of the various Ombudsmen.

“Until there is a common independent platform for the resolution of disputes, the public will continue to suffer confusion in what can only be described as a jurisdictional labyrinth or Ombud market place.”

Pillai continued in his ruling: “It is clearly not in the interests of the consumer and the financial services industry to have a plethora of Ombuds as, in my view, it does not assist in sustaining the integrity of the industry.”