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Are electronic quotes for real

06 June 2006 Life Ombud report

Electronic contracting - does an insurer's electronic "quote" translate into an offer open for acceptance by the proposed insured?

Mr A approached an insurer's intermediary with a view to taking out a policy on his life of which his minor daughter from a previous marriage would be the beneficiary.

Mr A and the intermediary completed the insurer's "Data Capture Form". This form recorded the insured's particulars and the life cover he wanted. The intermediary downloaded an electronic document from her computer, which had been equipped with the latest software supplied by the insurer. This type of document, although not described as a "quote" or "quotation", appears to be regarded as such in the industry. It reflected that it had been prepared by the intermediary, that its commencement date was 1 February 2004 and that it would be valid for 30 days only. The insured and the intermediary initialled each page of the printed document. On 2 February 2004, an electronic application was lodged with the insurer. The electronic application mentioned that the insured participated in scuba diving.

After receipt of the electronic application the insurer required certain medical tests as well as the completion of a so-called underwater questionnaire. On 25 March 2004 the insurer issued a counter-offer in terms of which it offered life cover but subject to an exclusion of cover in the event of death as a result of scuba diving.

Although Mr A, an attorney, was clearly happy to accept the counter-offer, he never had the opportunity of formally doing so.

On 30 March 2004 he was tragically murdered by the husband of a client with whom he was consulting at the time and who shot them both.

The complainant was Mr A's ex-wife who was acting on behalf of their minor daughter. She contended that by initialling the printed quotation, Mr A had accepted an offer from the insurer; consequently a binding contract had been concluded. The insurer answered that the form was never intended by it as a fullblown offer that could be turned into a contract by mere acceptance and, that it could not reasonably have been so understood.

We agreed. Although there were parts of the printed text that could have created the impression that the insurer had made a formal offer, other provisions clearly militated against any such construction. So for instance the client is advised that any application arising from the quote would be subject to the insurer's acceptance procedures and, most importantly, that a contract would be subject to the insurer's underwriting procedures.

What, then, was the purpose of the document? When someone wishes to obtain insurance cover from a specific insurer he would require information about the insurer's products, tariffs and other provisions that may be applicable. With the advent of the electronic era the usual way of obtaining the required information nowadays is to download the information by means of software supplied by the insurer to accredited intermediaries. At this stage the insurer is not actively involved as the negotiations are being conducted between the intermediary and the client. The purpose of the electronic "quote" was to indicate the basis upon which the insurer was prepared to negotiate with prospective clients. The actual offer is the client's electronic application to take up insurance.

On receipt of the electronic application the insurer can accept the offer or, as happened in this case, ask for further information about the applicant's medical condition and scuba diving activities, culminating in a counteroffer. Although there were indications that the insured would have been prepared to accept the counter-offer, he was murdered before he could do so.

The complaint was dismissed by the Ombud.

Extracted from the most recent Life Ombud report.

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