Moonstone Monitor 6 November 2008: Assessing an Insurance Value

While determinations by the FAIS Ombud makes the headlines, there are far more instances where settlements are reached without the need for a ruling. We look at two instances cited in the Ombud’s latest annual report:

‘Act honestly and fairly. . .in the interests of clients and the integrity of the financial services industry’. This requirement as set out in the Code of Conduct is not taken seriously by some advisers considering the number of complaints involving fraudulent policies that reach our office.

COMPLAINANT: Khutsoane

The roof of the complainant’s house was blown off during a storm and she instituted a short-term insurance claim. She was told that her house was under-insured as the house was insured for R21 000. The damages amounted to R32 000. The insurance company offered to pay out R6 000 for damages suffered.

The complainant was unhappy and felt that her house was under-insured because of the actions (advice) of the respondent. The respondent pointed out that the insured amount was furnished by the complainant who also signed the short-term insurance application form.

Furthermore, they contended that they cannot visit every client to ensure that their houses are adequately insured. It was pertinent that her household items were insured for R77 000 but her house for only R21 000.

The complainant’s version is that when asked what the value of her house was, she told the respondent that she did not know. The respondent then asked her; ‘what did you pay for your house?’ to which she replied R21 000.

The complainant’s version aligned with the available evidence. There was thus a duty on the respondent to assist the complainant to ascertain the true value of her house.

The matter was settled on the basis that the respondent pay the complainant an amount of R10 000.

COMPLAINANT: Venter

The complainant was insured by Sanlam (?) in respect of a second-hand vehicle. Upon lodging a claim he was offered the retail value of R79 100. The complainant contested this offer on the basis that his vehicle was insured for R10 000 more than the retail value. We investigated the matter and established that at the time of taking the insurance the complainant was only asked for how much he wanted to insure the vehicle, to which he responded that he had bought the car for R89 000. The car was then insured for R89 000.

The respondent had failed to ascertain the true value of the vehicle; hence he did not advise the complainant correctly.

The respondent settled the claim by offering R4 940, an amount accepted by the complainant.

The question in my mind is what the implications are when we assist clients in determining the value of items they wish to insure? If we underinsure we can be held liable for the loss, and if we over-insure we are accused of the loading the premium.