Life Ombud reports decline in consumer complaints

The Ombudsman’s office saw complaints from consumers decline for the first time in several years during 2007.

Reporting back on complaints resolved by his office during 2007, Judge Brian Galgut (pictured right), Ombudsman for Long-term Insurance, says last year’s case load had dropped by 1 311 cases or 15% compared to 2006.

“We received 7 923 complaints during 2007, significantly less than the 9 234 cases received in 2006. This decrease broke the seven-year trend of increasing volumes.”

Galgut says of the cases finalised last year, 44% were resolved wholly or partially in favour of complainants, the same percentage as in 2006.

Declining trend

Galgut says the essential reason for the decline is improved investment returns delivered by the favourable stock market performance over the past three years.

“More than any other complaint category, complaints concerning maturity values, policy performance and surrender values have shown the steepest decline. A similar trend has been experienced by life insurers.”

Other reasons for the reduction in cases include:

• The introduction of the FAIS Ombudsman, who has jurisdiction over complaints relating to advice given from October 2004.
• With the internal arbitrators at two of the biggest life companies firmly established, fewer (first instance) complaints reach the Long-term Insurance Ombudsman.
• Many insurers have also boosted their complaints handling staff and have streamlined their procedures, meaning more complaints are internally resolved to the satisfaction of the consumer.

Nature of complaints

Galgut says the nature of complaints received has produced no surprises in recent years, with claims declined remaining the biggest category at 43%.

He says a large percentage of complaints in this category are related to funeral policies and consumer credit life policies. Other reasons for complaints from low income earners include problems with waiting periods, exclusion clauses for pre-existing health conditions, and the time frame within which claims need to be lodged.

Administrative problems made up 26% of cases received during 2007, with dissatisfaction with policy performance having shrunk to 7% as is to be expected when markets perform well.

Galgut says misselling complaints are down to 8%, because more of them fall within the jurisdiction of the FAIS Ombud and because investment performance has improved.

“Many of the misselling complaints over the past few years have come from policyholders who took on offshore exposure when the Rand was at its weakest. The subsequent strengthening of the Rand coupled with poor stock market performance in Europe and the US had a devastating effect on the Rand maturity value of these policies. However, most of these policies have now matured and we expect these complaints to disappear completely.”

Consumer Awareness Initiatives

Galgut says improving consumer awareness of the service rendered by the Office of the Long-term Insurance Ombudsman has always been a priority.

“In 2007 we doubled the amount spent on consumer awareness during 2006, and the 2008 budget caters for double the amount spent in 2007.”

He also points out that the majority of complainants are from previously disadvantaged backgrounds, with a large proportion living in the rural areas and townships. “With this is mind we have enhanced all consumer awareness activities, having learnt that the target market we are trying to reach is less receptive to mass media campaigns than to face-to-face contact.”

In addition, says Galgut, his office allows complainants to submit complaints in their own language. Such complaints are then translated into English before they are investigated and passed on to the life company concerned.

Co-operation from life insurers

Galgut says it is worrying that his office still has to categorise 10% or 492 of finalised cases as incompetent, meaning that the life insurers involved responded to the office in a tardy or inadequate manner.

“Of these, 73% are surprisingly attributable to only five insurers. We maintain that poor service to the Ombudsman is often indicative of poor service to policyholders.

“For some insurers, particularly those serving the lower income groups, good service and customer care are simply not a priority.”

The above figures nevertheless show, Galgut points out, that there is favourable co-operation by most of the insurers.

Changes to the Office and the Council

• Judge Peet Nienaber retired as Ombudsman with effect from 31 May 2007.

• The Chairperson of the Ombudsman’s Council, Judge Gerald Friedman, retired with effect from 13 April 2007. He was replaced as chairperson by Dawn Mokhobo.

• Judge John Smalberger was appointed as its vice-chairperson.

• Isabel Jones, the well-known consumer journalist and passionate advocate for the consumer cause, had been a member of the Council since its inception in 1999. Her death on 11 March 2008 was a sad loss to the Council and the office.