The current media spat between attorneys Ronald Bobroff and Partners and Discovery Health has a much wider bearing on the industry than just that of the healthcare environment.
In essence, the law firm accuses Discovery of insufficient disclosure regarding its policy on claims when victims were also eligible for reimbursement from the Road Accident Fund.
An article posted on the firm’s website, calls it “Discovery’s wilful non-disclosure of hidden rules and exclusions, and non-compliance with the Medical Schemes Act no. 31 of 1998.”
Discovery responded by pointing out that, if a member or dependant receives compensation from the RAF for medical expenses, the member must then refund those amounts previously paid by the Scheme for the member’s medical expenses. This is to avoid the member being unjustly enriched at the expense of the Scheme by receiving double compensation for the same health event.
A 2012 media release titled, You cannot enrich yourself unjustly, by the Council for Medical Schemes addresses this issue:
If you are involved in a road accident, you can claim compensation from the Road Accident Fund (RAF).
If you are a member of a medical scheme and involved in a road accident, your scheme has to pay for your treatment.
But if the RAF pays you out, you must refund a portion of the money to your medical scheme.
Moreover, your medical scheme can actually ask that you claim from RAF and pay the scheme back.
There is a doctrine in our common law called “subrogation” which embraces a set of rules providing for the reimbursement of an insurer which has indemnified its insured under a contract of indemnity insurance. The view has been raised that one of the primary purposes of this doctrine is to prevent the insured from retaining compensation from both the insurer as well as a third party. In other words, your medical scheme can ask you to recover costs on its behalf, failing which you would have unjustly enriched yourself by receiving double compensation for the same health event, namely from your scheme and from the third-party insurer such as RAF. Subrogation also protects the long-term financial soundness of medical schemes.
Please make time to read the full CMS media release as the principle relates to all insurance products.
My concern, when reading this, arises from the disclosure requirements incumbent upon financial advisors. The article posted on the law firm’s website raises the question “…did its (Discovery’s) Broker, or anyone else on its behalf, ever tell you that the only medical care you and your dependents are unconditionally entitled to as of right is that arising out of illness?”
This raises the question of the extent to which you are required to explain each and every clause in the policy contract to a client. What are the material disclosures that you as the advisor are required to make to provide unequivocally clear information to your client?
Material Disclosures
Section 7(1)(a) of the General Code of Conduct, provides that a FSP, other than a direct marketer, must provide a reasonable and appropriate general explanation of the nature and material terms of the relevant contract or transaction to a client, and generally make full and frank disclosure of any information that would reasonably be expected to enable the client to make an informed decision.
Section 7(1)(c)(vii) of the General Code of Conduct provides that a FSP, other than a direct marketer, must, at the earliest reasonable opportunity, provide, where applicable, full and appropriate information and concise details of any special terms or conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances where benefits will not be provided.
In a recent communication to Moonstone Protector clients, we expanded as follows:
In terms of the common law there is no general duty on a broker to explain every clause of the policy to the insured. However, there is a legal duty, not only to inform the insured of the existence of any onerous policy conditions, but also to explain the importance of such conditions to the client. Upon renewal the broker is also required to satisfy himself or herself that there are no material changes to the policy or the insurable interest (for example, subsequent improvements to a client’s motor vehicle).
As many repudiations are due to policy conditions that were not met, it is sensible to point out to a client all conditions and/or circumstances in which benefits will not be provided and to ensure that these disclosures are documented (for example, via e-mail or the record of advice).
It will also be wise to enquire from the client whether there were any changes to his or her insurable interest at renewal stage and to document the client’s response.
