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Momentum speaks out

29 November 2018Jonathan Faurie
George Kolbe

George Kolbe

After initially deciding that it would not be paying the life insurance claim by the family of Nathan Ganas, Momentum announced on 21 November that it had changed its mind and would be paying out the claim. On 21 November, FAnews published a newsletter on Momentums decision to pay out the Ganas case. This generated a lot of interest among our readers and we received a lot of interesting comments.

FAnewsreceived the following questions and answers from Momentum. 

Are you going back on your decision to refute Mr Ganas’s claim?

A full disclosure of medical information remains non-negotiable. 

Our decision is sound in terms of the current insurance practice and contractual obligations. We still do not admit contractual liability for the payment of this death claim based on the material non-disclosure at application stage. 

This incident has brought to our attention the deep emotional reaction to (what is effectively) the result of a violent crime. It has given us an opportunity to reconsider the standard approach normally followed in the industry and come up with a new solution. 

Why has this solution been developed now?

The need for a solution like this has been clearly highlighted by the overwhelming societal response to the plight of families surviving violent crime, something that is unfortunately very prevalent in South Africa. 

Payments under this solution will be considered ex-gratia payments and is distinct from any of Momentum’s contractual relationship with any party to the insurance contract. 

It is offered as a gesture of goodwill in worthy instances as determined by Momentum in its sole discretion. We commit to following this new approach for all future claims. 

Was it the pressure from social media that led to this decision?

The feedback from the media, our clients and our own financial planners and staff was very valuable in highlighting the need for a solution that gives clients extra peace of mind when dealing with a death resulting from violent crime. 

Will this impact my policy premium?

Because this is an ex-gratia payment only considered in specific circumstances, and not a change in benefits, there is no additional charge for this. 

Any payments associated with this solution will be paid by Momentum as an ex-gratia payment, outside of the insurance policy, but not in addition to the insurance policy provisions. 

It will not affect the premiums of any existing or new clients. 

What constitutes: death as a result of a violent crime?

The intention is to cover all deaths as a result of violent crime, such as murder.

Each case will be considered on its own merit by Momentum, based on all relevant information. We are working around the clock to more clearly define what this will entail.

In addition to the above frequently asked questions, FAnews asked George Kolbe – Head Insurance Marketing at Momentum – a few additional questions. 

What would happen in a case of a planned hit/murder? For example: Brett Kebble and Anni Dewani 

The question has various interpretations, therefore I will use examples to position different outcomes.  If we assume that a life assured has a R4 million death benefit:

o          Scenario 1 - If it was a normal underwriting case, with full disclosure, the full life cover benefit of R 4 million would be paid out to the beneficiaries, contractually, unless it was an “assisted suicide” within the two year suicide exclusion period.

o          Scenario 2 - If it was a case where there was material medical non-disclosure (i.e. it qualified for the new solution with the guaranteed ex-gratia payment), a sum equal to the death benefit on the policy (in this case the maximum of R3 million), would be paid out as an ex-gratia payment, unless it was an “assisted suicide” within the two year suicide exclusion period.

o          In either of the above scenarios, if it was a “hit/murder” arranged by a beneficiary, we would still pay out the death benefit, but only to the estate of the deceased, not to the beneficiary. 

Often, the end result of a violent crime is not always death. Some people are left with disabilities which are in some cases severe. Would Momentum be making a payment in these cases? 

I assume the question relates to the new guaranteed ex-gratia payment solution. No payment will be made on disability benefits, the solution only applies to death benefits. The principle on which we introduced the solution for the victims of violent crime was that the dependents are suffering the consequences of the insured life’s non-disclosure and the insured life is not benefitting directly from the non-disclosure decision. If this solution is applied to disability claims, the insured life who non-disclosed would be benefitting directly from lying. 

We maintain that the starting point of any contract is honesty between the contracting parties. Life insurers ask for full disclosure and honesty during the application stage. There are no grey areas, clients must always disclose all required information. We cannot make contractual pay-outs where benefits were purchased on a dishonest basis. Applicants are informed at application stage of the risks of non-disclosure, which includes non-payment of claims. If a person applies for insurance cover and answers ‘no’ to a question, and they know the answer should be ‘yes’, they are lying and not acting in good faith and should not be rewarded for doing so. 

Editor’s Thoughts:
Momentum found an innovative solution to an emotionally charged situation, but we cannot ignore the fact that a precedent may have been set for other cases of a similar nature. Has the industry been disrupted in a good or a bad way? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by FAnews Editor, 30 Nov 2018
@Laurence - former broker - Momentum have provided the following response "Paying the late Mr Ganas’s claim, and any similar qualifying future claims, from profits was a business decision with the objective not to impact the premiums of existing and future clients".
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Added by Tony Harper, 29 Nov 2018
To create the required public trust needed for the Life industry to survive, the industry should SPLIT life cover into two parts. Death due to HEALTH reasons with the usual underwriting requirement requiring proof and good faith (honesty) in declarations. Secondly, death by ACCIDENT due to external violent means with no health underwriting requirements.
In my opinion, this split would create the clarity and trust that the public are asking for.
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Added by Andre Kotze, 29 Nov 2018
I think Momentum made the right call from a PRO point of view. Wrong call based on business principals of this industry. All they will now do in future is call for a wider range of blood tests on all cover amounts to restrict non disclosure.
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Added by Peter, 29 Nov 2018
I agree that non-disclosure should never be rewarded, but we should also guard against insurers using nondisclosure as a means of avoiding paying legitimate claims. As with all things it is about balance and what is material and reasonable. Following a death or any other claim and nondisclosure is discovered, the question should be asked; Would full disclosure have resulted in (A) the policy being declined, or (B) accepted at ordinary rates, or (C) being accepted with a loading. (The same principles should apply in the short term sector.)
Factual Example:
In the early 80's I was involved in a case where a young man took out a life policy through our brokerage and answered "No" to the question, "Have you ever had asthma, bronchitis, TB or any other respiratory problems?" He was killed in a car accident on the way back from doing military service. In the PMA report his GP disclosed that as a young child he was "slightly wheezy" but outgrew this during his primary school years. Technically, this wheezing was asthma, and although the insured never regarded himself as asthmatic, the insurer claimed that this was asthma. He had no symptoms during his high school years and was a good sportsman with no other negative health conditions. The insurer repudiated the claim based on non-disclosure. As the brokers we employed the services of a senior advocate to fight the case and lost. The judgement was based on the fact that the deceased had been in breach of a warranty (whether or not he could remember this wheezing or not) and therefore the policy was void. The insurer was instructed to refund all premiums from inception. In my opinion cases such as this are contrary to the aims of TCF and although legal are unethical. As with all things, in addition to being legal, it should be reasonable and ethical.
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Added by Ayanda, 29 Nov 2018
I fully agree with Mr Britz's comment: "Apply the rules and reject payouts to non-disclosure"cases.
Look at the mess that has now been created:
One would love to see the wording of the new clause in their policies "offered as a gesture of goodwill in WORTHY instances as determined by Momentum in its SOLE discretion."
This is not rule of law, it is rule of man.
Let us not destroy the sound practice, case and common law of the past 350 years due to mob rule and ignorant regulators..
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Added by Laurence - former broker, 29 Nov 2018
I have asked this question last week and am asking again

why @Momentum pays from "profits" and not from the "pool of reserves" - Is this allowed?
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Added by Gerhard Joubert, 29 Nov 2018
Most diabetics and hypertensives are insurable with premium loadings. However it is possible, although unusual, that a person with diabetes (mostly very uncontrolled, or with organ damage) and uncontrolled hypertension may be regarded as uninsurable. In this specific case I do not have sufficient information regarding to comment whether such a decision was justified.

But even if we accept that this client was not insurable, one should also look at the insurer’s normal business practice with declined cases. Most insurers, in their quest to increase new business volumes (in this tough market), do not simply decline uninsurable lives and walk away.

They usually present counter-offers, which in the case of declined cases, typically entails offering accidental death and/or accidental disability benefits. This is because accidental cover is offered with no underwriting.

So one should enquire if Momentum does not normally follow such practice.

Because if so, the likelihood of the client accepting such counter-proposal is very high, for the following reasons:
- Some cover is better than no cover.
- In this competitive industry, chances are slim that the client would have obtained better terms with another company.
- Accidental death cover is cheaper than comprehensive death cover, so affordability should not be an issue.

Of course it stands to reason that if the client were offered accidental death cover, there would have been a valid claim.

So this settlement is no favor from Momentum, rather an acceptance of their sloppy underwriting - at claims stage. I hope they have learnt a lesson from this on how to do proper underwriting at application stage.
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Added by Willie, 29 Nov 2018
One should go back to the causal origin - in this case it was murder and was the non-disclosure of diabetes irrelevant. Yes, the insurer could have not accepted the risk had it been disclosed BUT it could have accepted the risk with a loading. Hindsight ....
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Added by Johann Britz, 29 Nov 2018
Momentum now reward dishonest persons that are lying. Fact is that Momentum now create a grey area and this should not be allowed. This place the industry in a bad light. Non disclosure of relevant information should not be tolerated or encouraged and such cases should be rejected and not paid. Momentum says that they cannot make contractual pay-outs where benifits were purchase on a dishonest basis - yet they want to pay out and reward dishonest people,
How stupid can you be? Apply the rules and reject policy payouts due to non disclosure.
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