Commonsense administration will keep your brokerage clean
A couple of days ago we attended the launch of the Ombudsman for Long Term Insurance 2011 Annual Report. Immediately after the presentation I chatted to Ombudsman Brian Galgutt about the chance of a super ombudsman being established locally, to bring toge
The reason I asked the Ombudsman this question was because of the many consumer complaints which straddle two or more Ombudsman jurisdictions. One such case is the widely discussed FAIS Ombud matter between Candida Nduna (the complainant) and Aquarius Insurance Consultants CC and Maurizio Scolari (the respondents), which could just as easily have been brought before the Ombudsman for Short Term Insurance. The facts in this matter, as provided in the FAIS Ombudsman determination, are as follows.
Another claims rejection complaint
The complainant purchased a Peugeot 206 motor vehicle on the 12th of June 2008. On the same day she sought and obtained a short-term insurance policy through a representative of the respondent. Although the vehicle was in her name, the complaint’s son – a Mr M C Nduna – was to be the regular driver. This fact was communicated to the respondent and the necessary copies of driver’s licence and identity document were forwarded per request. When it emerged the driver was under 25 years of age the complainant’s monthly premium was adjusted higher.
Everything went smoothly until July 2009 when the complainant’s son was involved in a motor vehicle accident. The insurance call centre approved the removal of the vehicle from the accident scene and sent a towing service to remove it to an ‘authorised’ storage facility. A claim was lodged with the respondent and all the necessary documentation provided. From my experience this is an “open and close” insurance claim… But when the complainant’s husband contacted the respondent to find out about the claim settlement (around 8 September 2009) he received an e-mail from Aquarius Insurance Consultants cc informing him that the claim had been rejected!
What went wrong? New National Assurance Company declined the claim because (from their side) the driver was not named under the policy. Their policy wording clearly states: “No cover will apply under this section whilst the vehicle is being driven by or is in the custody of for the purposes of being driven by any person under the age of 25, unless that person has been named in the Schedule and accepted by us.” This contradicts with the complainant’s recollection of events at policy inception, which she backed up with a copy of her original policy schedule clearly indicating her son as the regular driver!
Solving the registered driver conundrum...
What happened in the 12 months between policy inception and claim? And how did the registered driver disappear from the policy? The confusion stems from a decision to transfer [not by choice] a book of insurance from one insurer to another. Late in 2008 the Financial Services Board suspended the licence of Niche Administrators [the administrator that had placed the initial insurance business with Saxum Insurers]. It was arranged that Endbridge Financial Services / Xsure would take over the affected Aquarius Insurance Consultants cc policies on the agreed terms and insure the business through New National. All of Aquarius Insurance Consultants cc’ clients went on cover from 1 November 2008.
Why did this complaint reach the FAIS Ombud instead of the Ombudsman for Short Term Insurance? According to the complainant her claim was turned down by the insurer due to the respondent’s failure to render financial services properly. It seems the respondent failed to advise the insured of the transfer of her policy. The FAIS Ombud notes: “When the insurance was taken over by a different insurer, a new contract of insurance came into existence, therefore the material terms on which cover was provided ought to have been disclosed to the complainant.” The respondent failed in this duty and could additionally not provide any documents supporting his compliance with the General Code when requested to do so.
There was no documentation in relation to the rendering of the financial service when complainant’s policy was transferred to the new administrator – no proposal form, no quotation and no document of any sort to record the communication that took place between respondent and complainant! It also emerged that the respondent had failed in its duty to familiarise itself with the terms and conditions of the new policy, voiding the assertion that the policies were taken on an “as is” basis. The FAIS Ombud’s conclusion: “Failure to comply with the Code was the sole cause of the rejection of complainant’s claim – with the result the respondents are liable to compensate Nduna for the loss suffered.”
A commonsense approach
The FAIS Ombud therefore upheld the complaint and ordered the respondents to pay, jointly and severally, to the complainant the amount of R83 500. It is difficult to feel sorry for the respondent in this case… In the event an entire book of business moves from one insurer to another you would surely take appropriate steps to communicate the move to your clients, with particular attention to common policy exclusions. A commonsense business approach could have averted this disaster!
Editor’s thoughts: The above case sparks an interesting debate. On the facts presented the complainant could have approached either the Ombudsman for Short Term Insurance or the FAIS Ombud for assistance. And I believe the complaint would have succeeded at either Ombudsman, with the only difference being the award of damages – against the insurer in one jurisdiction, and against the FSP in the other. Was this matter adjudicated in the correct Ombudsman office? And what does this incident say about fairness and equity in the financial services space? Add your comment below, or send it to [email protected]
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