Moonstone Monitor 17 January 2008
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We expressed our concern last year about the proposal by the FAIS Ombud that a "Super Ombud" be created to control the dealings of all ombuds in the financial services industry. This concern has now received support in the form of the results of a study conducted by Finmark Trust which states that "...creating a statutory super-ombudsman for the financial services sector would throttle accessibility and the flexibility of existing dispute resolution mechanisms in one of SA’s strongest economic sectors, leaving multitudes of consumers in the cold. " (Business Day) Our experience of the industry appointed ombuds had always been positive. People in positions such as the Long-term and Short-term ombudsmen were respected members of the legal profession who displayed exemplary objectivity and whose recommendations were accepted by both the public and the industry. Mr. Pillai expressed himself as follows: "Pillai said a maze of state-recognised sectoral ombudsmen — such as the banking, credit information, short-term and long-term insurance, and pension funds ombudsmen — was causing confusion at the expense of consumer protection. What is the object of so many forums if it is not to confuse and obfuscate? Last year, the issue of the confused consumer was addressed by the sectoral ombudsmen through the implementation of a single contact number for clients wishing to complain. The nature of their problem would be ascertained and their query forwarded to the correct office. We found it strange at the time that the FAIS Ombud elected not to join in this venture. According to his last annual report, his office received a total of 4484 complaints of which 1320, or just under 30%%, actually fell under its jurisdiction. Of the balance, 1550 was referred to other ombudsmen or product houses, and 1520 dismissed. From this it would appear to be abundantly clear that some kind of "sorting house" would be far more effective than a vastly more expensive Super cop setup that would have no additional benefit other than an enhanced status for incumbent. In fact, the amount of reporting that all the ombuds would be required to do to a central regulator would not only detract from their efficiency, it would add further to the cost of running these offices. We are also aware that a turf war had been threatening for some years now in terms of jurisdiction. Two problems are identified by the Finmark study in this regard:
“It is therefore recommended that the Financial Sector Ombudsman Scheme Council should play a more active and stronger role in addressing problems such as lack of consumer awareness and overlapping and unclear jurisdiction.” The Business Day article states: “The risk is that the consumer gives up and the complaint is never dealt with. It would make sense for the financial services ombudsmen to have a shared system that logs referrals and monitors the resolution of referred cases.” There was also no systematic feedback loop between ombudsmen and sector regulators — the National Credit Regulator, Financial Services Board and the Council for Debt Collectors — on recurring issues. This resulted in the regulators “missing out on valuable information about systemic issues in the industry they regulate”. FinMark said the solution lay in simplifying the consumer recourse landscape, especially for low-income consumers, through greater co-operation between ombudsmen, as well as through awareness-raising efforts targeting different consumers of financial services. The Finmark study concludes that the establishment of "...a super-ombudsman or a single conduct regulator for the financial services industry is not entirely desirable, particularly in a marketplace that requires greater accessibility, less formality and greater flexibility,” it said. And may I add: understanding of our business from a holistic perspective rather than a legal one only? |
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Those members of the public who see the FAIS Ombud as a passport to payment had better think again, judging by this determination made last year by Mr. Pillai. The complaint relates to the repudiation of a claim on the grounds of non-disclosure of material terms by complainant. During August 2006, the complainant applied for short term insurance cover for inter alia his household contents and a motor vehicle. The contract of insurance was negotiated over the telephone with a representative of the respondent. The insurance commenced on 1 October 2006. On 2 October 2006, complainant lodged a claim with respondent. The claim related to losses allegedly suffered by complainant. The respondent repudiated the claim and informed the complainant of this by e-mail on 17 October 2006. The repudiation was on the grounds of non-disclosure of material facts. In particular, the respondent relied on the fact that at the time complainant requested cover, details of his claims history were requested. On the question regarding previous claims, the complainant had not disclosed any previous claims. This, according to the respondent denied the insurers the opportunity of evaluating the risk. The insurer accordingly cancelled the policy from inception and advised that it would be refunding any premiums paid. Two issues arise in this matter. Firstly that the burglar alarm warranty was not valid and secondly that the warranty was never discussed by the respondent with the complainant as a result of which he was not aware that he had the choice of opting out of the burglar warranty clause by paying a higher premium. The first issue was determined by the Ombudsman for Short Term Insurance, who adjudicated the matter in favour of the insurer. He found, correctly in the Ombud's view that the warranty did indeed apply. It is clear from the documentation supplied that the complainant was aware of the alarm warranty. What is in issue, however, is whether the respondent discussed it with him and more pertinently, whether he was made aware of the fact that he had a choice to opt out of the warranty by paying a higher premium. In order to establish exactly what was discussed during the telephonic conversation, it became necessary to listen to the tape recording that respondent had provided. The issues at stake were whether the complainant had failed to make material disclosures when he applied for insurance through the respondent and whether the insurer was justified in repudiating the claim. Having listened to the recording it is quite clear that the question required a straight forward ‘yes’ or ‘no’. The complainant chose to answer in the negative when asked whether he had previous claims. Had the complainant wanted time to think about the question of whether he had any previous claims it was open to him to ask for that opportunity. This is especially so, bearing in mind that it was he who initiated the contact with respondent for the purposes of securing his short term insurance. According to the recording and documentation, there is no evidence that such an opportunity was sought. Complainant’s excuse that the question was vague and that he was not given the opportunity to think is without any basis, especially when one considers that the conversation adequately positioned what was required of him and what the consequences would be of failing to answer honestly. Mr. Pillai then states: "It becomes clear why complainant did not want to reveal details of his previous claims history (8 claims in the period 15/6/2005 to 1/4/2006). "When one looks at that history it is clear that complainant is someone who may be described as a ‘serial claimant’. It is important that a message is sent out to consumers that they cannot abuse the resources of this Office by lodging complaints which are tainted with fraud or dishonesty on their own part and expect the FAIS Ombud to come to their assistance." The FAIS Act makes provision for the granting of costs, including costs against a complainant in favor of the Ombud or the respondent if in the opinion of the Ombud the conduct of the complainant was improper or unreasonable. ‘When making a final determination in terms of section 28 of the Act, the Ombud may grant costs against the respondent or, in the circumstances contemplated by section 28(2)(b)(iii), against the complainant, in either case in favour of the other party to the complaint or in favour of the Office’ "The above vests me with authority to order costs against a complainant in appropriate cases, which costs could include the costs occasioned by the respondent. Whilst I will not do so to the full extent available to me in terms of the FAIS Act and the Rules, I will not hesitate to do so in future where the conduct of any parties is inappropriate or improper. ORDER [1] The complaint is dismissed; and [2] The complainant is ordered to pay costs in the sum of R1000.00 to this (the FAIS Ombud’s) office." I wonder how far a client would have to go before the Ombud orders him to pay the broker? A small consolation is that the last three determinations all were in favor of the intermediary. Paul se Perspektief/ Paul's Perspective Die uittrede van Shaun Pollock is 'n hartseer dag vir my, en ek glo ook vir menige ander sportliefhebbers. Die rekordboeke spreek vanself, maar êrens vorentoe gaan iemand meer paaltjies neem, of meer lopies slaan. Wat hulle nie kan wegneem nie is wie Pollie die mens was. Bekwaam, bestendig en beskeie sê eintlik nie werklik wie hierdie besonderse mens is nie. Het ons baie meer rolmodelle soos hy gehad, had ek baie meer hoop vir ons land en ons sport. We reflected last week on how a name can convey a very different perception from that intended by the owner of a business. Rob Russell responded as follows to our request for examples from readers: "In PE in the 1980’s, the bank for whom I worked had a small construction company as a client, with the dodgy name of “Ben’s Erection.” The dude even handed out little stickers with the company name, which were plastered all over the bank, on telephones, light switches, etc." There is a saying that one should never pick a quarrel with a man who buys his ink by the barrel. The same apparently applies to the man who supplies your electricity. I suspect the record number of load sheddings we were subjected to this week was the result of all the Eskom jokes doing the rounds. "Load shedding" is in my opinion merely a euphemism for "dumping" their poor forward planning problems on us, their consumers. Imagine if we were to provide such service to our clients - we would be told in no uncertain terms where we could go. Baie dankie vir al die goeie wense vir 2008; ons vertrou dit sal ook vir u 'n jaar wees om te onthou, en vir die regte redes. Groete / Greetings Paul Kruger
When Bob found out he was going to inherit a fortune when his sickly father died, he decided he needed a woman to enjoy it with so one evening he went to a singles bar where he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away. "I may look like just an ordinary man," he said as he walked up to her, "but in just a week or two, my father will die, and I'll inherit 20 million dollars." Impressed, the woman went home with him that evening and, three days later, she became his stepmother. |
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