Fewer complaints reach the Ombudsman for Long-Term Insurance
Significant decline in number of cases received
The highlight of the report was the strong decline in the total number of complaints received by the office. The Ombudsman for Long-Term Insurance, Judge Brian Galgut, announced that the total of 7 923 complaints received in 2007 represented a 15% decline over the previous year.
Complaints were further categorised as 4 494 full cases, 222 mini cases, 876 cases transferred to insurers and 2 331 ‘out of scope’ cases. The ‘out of scope’ cases consist mainly of cases not related to life insurance products, cases that should have been dealt with by other Ombudsman or cases which had not initially been referred to the affected insurer. ‘Out of scope cases’ are often referred to the FAIS Ombud, Pension Funds Adjudicator or other appropriate regulator. Galgut believes the 28% weighting to cases in this category is in line with international trends. Of the 4 700 full cases finalised during 2007 44% were wholly or partially resolved in favour of the complainant!
Reasons for the decline
Galgut noted that it was “very difficult for his office to pinpoint reasons for a dramatic increase or decrease” in number of complaints received. He believes the strong increase in the number of complaints between 2000 and 2006 was largely due to the Life Offices’ Associations’ drive to ensure complaints reach the Ombudsman. A portion of this increase could also have been attributed to heightened consumer awareness as the number of other ombudsman schemes grew.
It seems the solid performance on the local stock market is a major factor in the decline in the number of complaints received in 2007. This is confirmed when considering the category of complaint showing the most improvement. Dissatisfaction with policy performance declined from 595 complaints in 2006 to 317 while dissatisfaction with surrender or paid-up values fell 26% to 144 cases.
Another reason for the significant decline is that complaints involving miss-selling and improper advice have been referred to the FAIS Ombud since 1 October 2004. Miss-selling complaints fell from 568 in 2006 to only 383 last year. The two internal arbitrators at Old Mutual and Sanlam are also well established, and their existence means “fewer first instance complaints are directed to the office.” Finally, Galgut says “insurers have boosted their complaints handling staff and streamlined their procedures, so that complaints are being satisfactorily handled at source…”
A worrying number of incompetent cases
A massive 10% (470) of all complaints finalised by the Ombudsman were marked as incompetent. This tag is assigned to any case where an insurer responds tardily to requests from the Ombudsman’s office and otherwise delays resolution of a complaint. Insurers incur penalties for each incompetent case. Galgut observed “there is no good reason why this should be the case.” He says a comment made in the 2003 Ombudsman report still holds true: “Poor service to the Ombudsman often indicates poor service to the policyholders.” The number of incompetent cases showed that insurers “serving the lower income groups’ were not prepared to prioritise customer care and good service.
Of even greater concern was that 73% of these cases came from just five of the office’s member companies. We asked the Ombudsman if these members could be ‘named and shamed’ – but they are protected by confidentiality clauses in the bodies’ constitution. Galgut mentioned that the office is busy negotiating with two of these companies to improve the situation. He expects talks with the other main culprits to improve the situation going forward.
The year ahead
Education was once again highlighted as a key shortcoming in the industry. Galgut pointed out that the majority of complaints received by his office came from people with previously disadvantaged backgrounds living in rural areas. This has prompted the Ombudsman to increase education spending, doubling the 2006 budget in the 2007 year – and repeating the step in 2008.
The Ombudsman for Long-Term Insurance is also awaiting the results from the recent investigation into practices in the credit life industry. This report was expected toward the end of March 2008 but has still not surfaced.
Editor’s thoughts:
The Ombudsman for Long-Term Insurance has experienced a 15% decline in complaints in the 2007 year. This could indicate that the life insurers are finally improving their complaints resolution processes. Does your experience support a decline in the number of long-term insurance complaints? Add your comments below, or send them to [email protected]
