Long term insurers urged to play fair
Judge Brian Galgut is the fifth Ombudsman for Long-Term Insurance to serve since the office was established in 1985. On Thursday, 15 April 2010, he presided over the scheme’s Annual Report 2009. He started his presentation with a brief history of the scheme. Dr JG van der Horst, who was the chairman of SA Mutual Life Assurance Society, raised the need for an industry scheme in his capacity as the chairman of the then Life Office’s Association (LOA) as far back as 1972. “He said at the time that the appointment of such a scheme would help raise the standards of the industry – and he stated quite correctly as it turned out – that anybody in that position would have to be independent,” said Galgut. The scheme was put in place just more than a decade later, following a media campaign by the Cape Times newspaper protesting poor service by the industry.
2009 was a bumper year for ombudsman and life insurance consumers alike. “Having experienced an increase in complaints received in 2008, the numbers increased yet again in 2009, this time by more than 10%! We received 9 088 complaints, being the second highest number ever,” observed Galgut. The office finalised 5 380 of these cases, recovering R102m for complainants – the highest amount in any year thus far.
A mixed bag of complaints
One of the disappointments in the latest reporting period was the spike in so-called mini cases which occur when complainants bypass their insurer’s internal complaints resolution process. These mini cases have to be forward back to insurers for further attention. Deputy Ombudsman, Jennifer Preiss, appealed to insurers to make sure their policy documents specifically identify complaints procedures and contact numbers, and that their call centres know how to handle complaint calls.
The 2009 report contained a useful summary of finalised cases, split into eight categories. Claims declined (policy terms or conditions not recognised or met) constitute the bulk of disputes, with 2 645 (49%) of 2009 complaints. “The biggest group is where the insurer has declined the claim based on a pre-existing exclusion clause, particularly in credit life policies,” said Preiss. A number of funeral policies are declined during waiting periods. The second largest category of finalised cases stem from poor communications, including documents or information not supplied and poor service. 1 203 (22%) of such complaints were finalised through 2009. There were 146 (3%) complaints about claims declined for non-disclosure, 180 (3%) complaints about poor policy performance or maturity value, 211 (4%) complaints stemming from policy lapses and 173 (4%) complaints about miss-selling.
609 of the finalised complaints revolved around dissatisfaction with surrender or paid up values, including a number of cases involving the calculation of costs on endowment policies. A previous decision by the Pension Funds Adjudicator (PFA) in this regard had been taken on appeal, and both officers chose to ‘park’ such cost cases until the court reached a final decision. This delay affected approximately 500 complaints – some dating back to 2005 – which were all finalised last year. The ombudsman resolved 41% of cases wholly or partially in favour of complainants.
Time to play fair!
“A matter that I devote some time and attention to in the report, deals with the need to be fair to consumers,” said Galgut. He referred to a November 2009 speech by the deputy minister of finance, Nhlanhla Nene, who said: “You can count the profit you make, but you cannot count the satisfaction that a customer gets from good service.” Although aimed at government this was a clear call to all sectors of business to pay closer attention to ethics and integrity. Galgut once again questioned fee, return and policy wording transparency in the life industry. “Many policyholders are not aware, when taking out a policy, of the exact limits of their cover or the implications thereof, or what the full implications of their investments may be,” he said. These are people who read their policies; but still cannot consider the true implications (to them) of complex policy wordings!
He provided three examples of situations that persist despite continued regulatory intervention in the financial services space. The first occurs in policies which extend cover for dread disease, where the disease concerned is defined in terms which laymen do not understand, sometimes because they are framed in medical terms, and it is only at claim stage that the true limits of cover become apparent to them. Another major concern is the vagueness of reference to insurer charges in investment policies. “At inception the policyholder will have been furnished with some information, but what is not provided is figures quoted in rand,” noted Galgut. He suggested the figures were useless to the average consumer – and possibly even to some financial advisers. A final area for concern was policy loans, which had been addressed in the previous annual report.
Galgut pleaded: “I would urge insurers to go the extra mile in one respect, by spelling out with greater clarity in the marketing and wording of their policies the exact implications of the terms of their products.” He pledged the office’s continued support to the to the FSB Treating Customers Fairly project, which kicked off in 2009. Preiss had some requests of here own: “A lot of insurers could actually resolve these issues in their offices before complaints arrive at the office.”
Editor’s thoughts: Last year the Long Term Insurance Ombudsman was given powers to ‘name and shame’ insurers in instances where he made a final determination. There were three such determinations in 2009 – one against Hollard Life and two against PPS. Would you prefer more detailed statistics on insurance complaints (including company names) escalated to ombudsman schemes? Add your comment below, or send it to [email protected]
