Settled Complaints

The Office of the FAIS Ombud is committed to resolving complaints in a procedurally fair, informal, economical and expeditious manner, with reference to what is equitable in all circumstances. In this vein the Office of the FAIS Ombud always explores every available avenue to resolve a complaint between the parties on an informal basis without the need to formally resolve the matter by way of a determination.

Appreciating the fact that all matters settled by this Office are done on a without prejudice basis, the complaint detailed below are examples where the Office of the FAIS Ombud was able to facilitate the successful resolution thereof. This complaint also highlights a specific concern related to assistance business where child dependants who turn 21 and no longer qualify for child dependant status, unless they are full-time students, and must be either noted as an extended family members on the policy or be provided for on a separate policy, and what would appear to be a failure by FSPs to address the issues surrounding this matter and to put processes and procedures in place to mitigate the negative outcomes experienced by clients. The Office of the FAIS Ombud does appreciate that in a number of matters investigated, this disclosure is made at the inception of the policy when the financial service is rendered. Having said that, no further attempt is made to. notify the client after the policy has incepted, other than a cursory mention in the annual renewal letter, which is a standard template not specifically directed to any client. What then happens is that once a child dependant has reached 21, the policy continues as normal, unless the client remembers and specifically requests the amendment to the policy. Premiums continue to be collected with the situation only rearing its head when there is a claim submitted in respect to the passing of the dependant.

In an era when ‘insuretech’ is a buzz word in the industry and FSPs are continuously looking to make the most of technology and innovation, it is hard to imagine why FSPs who provide such policies are not able to employ technology to raise alerts when such thresholds are reached, so that the client can be contacted and provided with suitable advice to ensure that they remain appropriately insured. It would appear that the focus on technology is more towards creating more innovative products and streamlining distribution channels and claims processes, all designed to facilitate the sale of products and services, as opposed to addressing concerns experienced by existing clients. Once again, reference is made to TCF and Outcome 3, where customers must be provided with clear information and kept appropriately informed before, during, and after the point of sale. Once again, this is echoed in the General Code, section 11, where a provider must have and effectively employ the resources, procedures, and appropriate technological systems at all times that can reasonably be expected to eliminate, as far as reasonably possible, the risk to clients etc. Another aspect to consider is how many existing policies are in place where FSPs are collecting premiums for child dependents over the age of 21. Unless there is cause to submit a claim, these instances go unnoticed and premiums are being collected for a benefit that will never be provided. This is contrary to treating customers fairly and a matter that shall be brought to the attention of the FSCA when identified

Complaint: B v O
The complainant, Mrs M, had applied for a funeral policy with the respondent, a registered Financial Services Provider (‘FSP’) in terms of the FAIS Act. The policy had provided for a funeral benefit of R10 000 in respect of the complainant’s eldest son, who was born on 19 June 1999. The complainant’s son had passed away during March 2021 when he had already turned 21 years old. The claim was subsequently rejected as the deceased had been older than 21 and not a dependent student when he had passed away. The complainant was dissatisfied as she claimed that she has not been informed in the 5 years since the inception of the policy that dependents who reach the age of 21 are no longer covered unless they are full time students under the age of 26.

Unable to resolve the matter with the respondent the complainant approached this Office for assistance. Upon investigation the Office of the FAIS Ombud directed communication to the respondent in accordance with the Rules on Proceedings of this Office. The respondent responded by stating that the deceased no longer qualified as a dependent child at the time of his death. The claim was therefore contractually unsuccessful. Furthermore, the respondent also made reference to the fact that the complainant was provided with an annual yearly statement, which explains what the requirements are for a child to be considered a dependent child. It also states that as soon as the child is nearing the age of 21 that you should call the financial advisor to make arrangements for a new policy. The respondent therefore proposed that this matter be dismissed as there were no reasonable prospects of success.

Whilst this Office has concerns in respect of the provisions of the General Code of Conduct for Authorised Financial Services Providers and Representatives (‘the General Code’), provisions such as Section 2, and Section 11, which require that an FSP act with the required due skill care and diligence in the nest interests of the client, and that an FSP must at all times have and effectively employ the resources, procedures and appropriate technological systems that can reasonably be expected to eliminate as far as reasonably possible, the risk that clients, product suppliers and other providers or representatives will suffer financial loss, the Office of the FAIS Ombud approached this matter in a more informal manner, and asked the respondent to consider the circumstances of this matter and why it would not be possible for such an institution to have systems in place to mitigate the occurrence of such matters.

In response, the respondent confirmed that its Discretionary Committee had agreed to consider the claim on the basis that the adult child was covered under an Extended Funeral Plan at the time of reaching age 21. As a result, the death value would be equal to an extended family member cover amount, less any premiums that should have been paid at the date of death. The reconstruction of the policy saw that the death benefit would have been R10,000.00, with a monthly premium of R108.00. At claim stage, the respondent would therefore have received R972.00 in premium payments (R108.00 x 9 months, from 1 July 2020 until 1 March 2021). The total amount payable was therefore R9,028.00 (R10,000.00 cover less R972.00 assumed premium payments) and the offer was accepted by the complainant.

The Office of the FAIS Ombud would like to acknowledge the respondent’s efforts in looking to resolve this matter, and we encourage all FSPSs who provide assistance business to look at how their processes and procedures can be enhanced to appropriately advise clients of such milestones, and where not possible to look at such matters objectively and consider a resolution that is in keeping with the provisions of the General Code and the principles of Treating Customers Fairly.