A nice juicy one

Today I would like to present you with a case study. One that highlights several key issues and has left at least one reader with an ugly taste in his mouth.

Its about "best advice", being "fit and proper" and so-called "stringent regulation of the insurance industry".

"An existing client visited our offices and requested we evaluate his policies and benefits as his wife has resigned from her employer and she has subsequently forfeited valuable employee benefits (group life and pension). 

She is now going to work for him in his business venture that is expanding tremendously.  Based on the FNA we did, the client accepted a life policy with the following benefits:
 
* Life Cover and Disability for both of them (integrated because of their health membership)
* Trauma Cover (both)
* Income Protection for him @ R30 000 pm
* Family Trauma (M + S + 3 Children)
* Health Plan Protector (protecting his Medical Aid contributions for 5 yrs)
* Waiver of Premium (including his RA Optimiser of R1300 pm)
* Female benefit for his wife
* Payback Benefit included
* Child Severe Illness Benefit included
* Inception date 1 Jan 06

Last week I received notification via a Policy Replacement Advice Record (PRAR) that the client has now cancelled the above policy, which has been replaced with a new policy offering only:
 
 Life Cover & Disability for both  
 Trauma Cover (both)  
 Premium reduction (saving) is only R854 pm

The reasons indicated on the PRAR for churning were the following:
 
a) Addlib benefit is not available on this policy - although the payback benefit is, so it's not a valid reason.
b) The reason as to why the new contract is more appropriate? - "client not getting service from current broker" is not a valid reason to motivate why the new policy is more appropriate.  The reason doesn't carry any weight as I have been in contact with the client every month since inception and he has visited the offices four times, up until two weeks ago.
c) The reason why a replacement was considered as opposed to amending existing benefits?  Client wants "standalone" risk cover, irrespective his medical aid membership - not valid reason as one can remove the integrator from his existing policy.
 
Upon discussing the issue with compliance officers as none of the reasons given in the PRAR are valid or based on best advice because the existing policy could have been changed, the response is that as long as the "new" broker has completed the PRAR correctly the switch is acceptable.

This is irrespective of whether best advice was given or not.  Irrespective of whether the new policy is more expensive or not.  
 
This now raises several major concerns:
1. The purpose and existence of the FSB, LOA and all the other organizations, who are "protecting" the client from  being ill-advised.  
2. The issue regarding giving "best advice' that we all are threatened with daily.  
3. Why can't I, as in the past, claim the clawback commission from the new broker"

Editor's thoughts:
* I would love to hear some comments from readers about their experiences and as importantly comments on this case study. E-mail me angelo@fanews.co.za