When an industry Ombudsman describes a specific period as unremarkable, it is a sign that progress is being made in the industry and that the objectives of Treating Customers Fairly (TCF) are being adhered to. This was the case when the Office of the Long Term Ombudsman released its 2016/17 Annual Report on 15 May.
Running the numbers
During the period under review, the Ombud received 5 435 chargeable complaints. During this same period, the Ombud resolved 3 371 cases; 85% of these cases were resolved within a six month period and 29% of these cases were resolved wholly or partially in favour of complainants.
Of concern is the fact that the total cost to resolve a standard case was R3 707. The Ombud did not give any indication as to how many of the 5 425 cases were standard cases. However, if we assume that 10% of these cases were standard cases, it cost the Ombud roughly R2.9 million to resolve them. If this percentage increased to 60% of total claims, it would cost the Ombud roughly R12,66 million to resolve its standard cases.
It then becomes scary to think how much of your premium (as a percentage) goes towards resolving complaints.
Nature of complaints
The Ombud reports that the declined claims category had the highest number of complaints
with the poor service receiving the second largest number of complaints. The Ombud added that this is the same pattern as in previous years.
“We are noticing a trend that the non-disclosure category is slowly increasing over time. It has increased from 3% in 2011 to 5.74% in 2017. This could be due to various factors, such as more direct business being sold; more insurers employing automated underwriting; the effect of churning; pressure on insurers to out-list new policies very quickly; and, possibly, an increase in the dishonest completion of application forms,” said Judge Ron McLaren, Long Term Ombud.
He added that, although there were only 200 non-disclosure cases closed in 2017, these cases took a considerable amount of time because there are invariably disputes of fact involved. “On some occasions, we have to hold hearings in order to resolve such disputes,” said McLaren.
He added that there is also a slight increase in the complaints about values. “This is a repeat of the pattern we have seen in the past during difficult economic times,” said Judge McLaren.
Complainant joy
The percentage of cases resolved in favour of complainants increased slightly from 28.1% in 2016 to 29% in 2017.
“If we add the transfers settled to the number, then that percentage increases to 36.4%. This is very similar to the percentages in the last few years. R193.3 million was recovered for complainants in the form of lump sums. This figure does not reflect the value of other benefits, such as recurring income disability benefits, annuities and reinstatement of policies,” said Judge McLaren.
An area of concern
While it may not be surprising to those who work within the financial services sector that non-disclosure has been flagged as an area of growing concern, it is interesting to note that the Ombud has now mentioned that it is an area that it will be keeping an eye on.
This is an area of concern that was highlighted by Liberty in their most 2017 claims statistics and more recently by Momentum in their 2017 claims statistics.
Editor’s Thoughts:
The fact that the Ombud described the period under review as uneventful proves that the long term insurance industry is as strong as it has ever been. The adviser plays a vital role in this, which means that your role in the industry is as vital now as it has ever been. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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Added by GAVIN CAME, 21 May 2018