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Not properly informed of the requirements of a policy

07 February 2024 Myra Knoesen

In the recent determination by the FAIS Ombudsman (FAIS Ombud) a broker was held responsible for not adequately informing the client about the need for a satellite early warning device.

The complaint

On 5 February 2016, the Complainant, Dr. Luzanne de Beer, purchased a Toyota Land Cruiser. The vehicle was added to her insurance policy obtained through the

Respondent, Badie Jacobs Insurance Brokers, who acted as the complainant’s broker. The insurer of the policy is Quicksure, which is underwritten by Old Mutual Insure.

On 30 July 2018, the vehicle was stolen from her place of employment. She submitted a claim with the insurer, Quicksure, in the amount of R312 400.

On 17 August 2018, the insurer rejected the claim, as de Beer’s vehicle did not have a satellite early warning device when it was stolen. She lodged a complaint against the insurer with the Ombudsman for Short-Term Insurance (OSTI).

OSTI dismissed the complaint against the insurer. De Beer filed a complaint form with the FAIS Office against Badie Jacobs Insurance Brokers on 29 October 2018. She submits that Mr. Jacques Jacobs, a representative of Badie Jacobs Insurance Brokers, did not properly inform her of the requirements of the policy, including the need for this device to be installed.

She further submits that there was no correspondence enquiring whether she had a satellite early warning device installed and that the respondent never requested the installation certificate from her.

Respondent’s response

The Respondent submitted that the letter from Quicksure, dated 17 August 2018, states that the claim was rejected due to the absence of a satellite early warning device, not a tracker. According to the respondent, De Beer signed the policy documents after it was explained to her that a satellite early warning device had to be fitted. She did not give the contract and accompanying disclosure the attention they deserved.

According to the respondent, the policy stipulates the requirement regarding the satellite device, which is the grounds on which the claim was rejected. This is indicative that the process was discussed with De Beer, that she gave her inputs, and that her inputs were incorporated into the contract. The satellite device was explained to her. This fact is corroborated by the correspondence of Suzaan Calitz, dated 02 April 2019. This email states:

Ek Suzaan Calitz werksaam by Badie Jacobs Makelaars was in die kantoor 31 Julie 2018 met die aanmelding van Dr L De Beer se voertuig eis. Ek het kennis geneem dat kliente herken het hul nie voldoen het aan die vereistes soos per E-pos aan hul gestuur is nie en was hul nalatig op die "tracker" afdeling en nie voldoen het aan die vereistes nie.

Baie dankie

Suzaan

Translated - I Suzaan Callitz, employed by Badie Jacobs Brokers, was in the office on 31 July 2018 when the vehicle claim of Dr L De Beer was reported. I took note that the clients admitted that they did not comply with the requirements as per the email sent to them and they were negligent on the tracker section.

Thank you.

Suzaan.

A letter dated 27 November 2017, which was sent to the complainant, states:

“Voertuie: Maak asseblief seker van die voertuie se beskrywing, Registrasie nommers, Tracker of enige ander Sateliet opsporingstelsel – indien dit ‘n vereiste op u polis is, moet in werkende toestand wees en aktief wees.”

Translated: 

Motor vehicles: Please make sure of the description of motor vehicles. Registration numbers. Tracker or any other satellite tracking system - where it is a requirement on your policy, must be in working condition and be active.

Attempts to resolve the matter

From the onset, the respondent denied liability and submitted that De Beer was aware or ought to have been aware of the satellite early warning device. On 24 August 2023, a recommendation, in terms of section 27(5) (c) of the FAIS Act, was sent to the respondent advising it to settle the claim.

The respondent responded on 7 September 2023 that they intended to appeal the decision and that they were seeking legal advice on the matter. Subsequent attempts to contact the respondent or its compliance officer telephonically and by email have been unsuccessful.

Assessment of the evidence

According to the Ombud, the policy makes it clear that a satellite tracking device was a requirement for theft cover on the vehicle. Based on the Office’s experience with cases it adjudicates, an early warning satellite tracking device is not a normal requirement in a policy for theft cover on all vehicles. It is generally only applicable to certain vehicles depending on value and exceptional risk factors.

The respondent submitted that it discussed the requirement with De Beer, but it has not produced any evidence in this regard. There is no record of advice reflecting any discussion with De Beer regarding the satellite tracking device. There is no evidence of the respondent following up with her to confirm whether a device was installed.

The only evidence the respondent has submitted, according to the Ombud, is a general letter sent to all its clients and the policy schedule that was sent to De Beer at the inception of the policy.

The general statement made by Ms Calitz, the Ombud stated, has little probative value and does not advance the respondent’s case. At most, the statement only reflects the understandable regret that De Beer expressed for not paying attention to the schedule requirement or the letter. It does not provide any proof that she was properly advised and informed or that the respondent complied with its responsibilities in terms of the Code.

On a balance of probabilities, the Ombud said it can only be concluded that the respondent did not provide any additional specific explanation or information to De Beer regarding the early warning satellite tracking device (besides what was contained in the policy schedule). The respondent appears to regard itself as a mere conduit or post-box for De Beer’s transaction with the insurer. As per the Code, its duties and responsibilities extend far beyond that. The respondent is the expert in the field and is expected to provide all the information and assistance necessary to ensure that De Beer is well advised and informed regarding a special condition such as an early warning satellite tracking device.

It will then be reasonably expected to follow up regularly to check whether the device was installed and to send proof of the installation to the insurer.

Sending a general letter to all its clients and the policy schedule to the complainant does not satisfy the requirements in terms of the Code, according to the Ombud. Had the respondent complied with its duties, there is a high probability that the complainant would have installed the device, and the claim would have been successful. The respondent’s failure to comply with the Code led to a situation where the complainant was not reasonably aware of the requirement and did not take the necessary steps to comply with the requirement.

The complaint was upheld, and the respondent was ordered to pay De Beer the amount of R301 466.

Writer’s Thoughts

In the absence of concrete evidence that the broker informed the client about the specific policy requirement, the decision favoured the complainant. Cases like these are reminders to maintain communication and documentation to best serve clients and avoid potential legal issues. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts myra@fanews.co.za.

Comments

Added by Ben Holtzhausen, 09 Feb 2024
I do agree the broker should ensure he keeps adequate proof that he informed the client, but merely to protect himself againt ill rulings of the ombud.

But I don't agree with the ombuds ruling.
Over the last 20 years it has become pretty common knowledge that any high risk vehicle is not covered for theft without appropriate anti-theft devices as specified by the insurer.

Anyone buying a Land Cruiser (or any other pricey vehicle) without ensuring the vehicle is fitted with the required anti-theft devices, will be naive about other issues too.

Clients often choose to be non-chalant about t's & c's and believe they are above the requirement to read. In many cases, the broker would verbally point out the t's & c's, yet clients will quickly resort to elective loss of memory when they are confronted with the consequences of their own negligence.

Buying any car without ensuring you understand the insurance requirements, is equally as stupid as buying perishable food without checking the "sell by" date.

For what it's worth, I am not a short term insurance broker.
Report Abuse
Added by Ben Holtzhausen, 09 Feb 2024
I do agree the broker should ensure he keeps adequate proof that he informed the client, but merely to protect himself againt ill rulings of the ombud.

But I don't agree with the ombuds ruling.
Over the last 20 years it has become pretty common knowledge that any high risk vehicle is not covered for theft without appropriate anti-theft devices as specified by the insurer.

Anyone buying a Land Cruiser (or any other pricey vehicle) without ensuring the vehicle is fitted with the required anti-theft devices, will be naive about other issues too.

Clients often choose to be non-chalant about t's & c's and believe they are above the requirement to read. In many cases, the broker would verbally point out the t's & c's, yet clients will quickly resort to elective loss of memory when they are confronted with the consequences of their own negligence.

Buying any car without ensuring you understand the insurance requirements, is equally as stupid as buying perishable food without checking the "sell by" date.

For what it's worth, I am not a short term insurance broker.
Report Abuse
Added by Myra, 07 Feb 2024
Hi Glenda,

I agree. Proof is important.

Nursee, 100%. How much is enough?
Report Abuse
Added by Nursee Parannath, 07 Feb 2024
I agree, we must adhere to regulations, then I ask myself _how much should go into a Compliance letter?_
The Policy Schedule & Wording, plus supplementary documents were sent. This is a legal contract between insurer & insured - clients are responsible to read these.
Clients simply don't read stuff we send to them.
With load shedding, adverse weather conditions, motor theft & other criminal activities - insurers are changing terms & conditions, all the time.
Tracking requirements is becoming a broker's responsibility- is he supposed to be the expert in this too?
I spent last 2 days looking at Tracking options.
Each supplier has their own product range & tech specs - very often they don't tie up with insurers requirements.
So, I ask again:
1. How much info should go into a Compliance Report (to satisfy legislation) which will not be read by clients.
2. How & when will clients be held accountable for reading the documents instead of looking a cost of premiums only.

In my opinion I feel Ombud ruled incorrectly and the industry & professional bodies in the field MUST & SHOULD support the overburdened Broker.

Clients need to be accountable to abide by THEIR obligations.

Report Abuse
Added by Glenda de Stadler, 07 Feb 2024
The broker is in breach of the FAIS Act. If he had followed due process by completing a Record of Advice as required by the Act he would be protected. Negligence has cost him dearly. It's all about proof.
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