The FAIS Ombud has cited a complaint that arose when an insurer rejected a claim for stolen jewellery to highlight why advisers must be able to produce a record of advice.
The Ombud referred to the same complaint in a communication issued in December last year, to draw consumers’ attention to the importance of understanding warranty clauses in their insurance policies, particularly those related to valuables such as jewellery. These clauses often have strict requirements, and failing to comply can result in a reduced claim payout.
In September 2022, the complainant’s wife removed her tennis bracelet and diamond earrings and placed them in a bag in the overhead locker during an international flight, to avoid discomfort while sleeping. On arriving at their hotel, they discovered the jewellery was missing.
The subsequent claim, which was for R785 000, was reduced to R150 000, and after the deduction of the excess, R135 000 was paid to the complainant. The claimed amount was reduced because the warranty required the items to be locked in a safe when they were not being worn.
The complainant lodged a complaint against the adviser, arguing he was not clearly informed about the warranty requiring jewellery to be locked in a safe when not worn. The complainant believed “all risk” cover meant coverage under all circumstances.
In response, the adviser referred to the policy documents and emails about the policy’s renewal that included the warranty and the complainant’s confirming that he understood the requirement. The Ombud’s Office also found that the warranty was clearly set out in the policy.
However, the adviser was unable to provide a copy of the record of advice when the policy was taken out, blaming system migrations and the age of the policy, said the Ombud for Financial Services Providers.
Section 9 of the General Code of Conduct for Authorised Financial Services Providers and Representatives requires that FSPs keep a record of advice given to clients. Furthermore, section 3(2)(a) of the General Code requires that FSPs keep accurate records of the advice provided.
The Ombud’s Office said the record of advice is a crucial document that the FSP is obliged to retain and produce when required, particularly if the advice is disputed.
The Office recommended that the adviser pay a settlement of R50 000 because he was unable to produce the record of advice as evidence. The adviser and the complainant accepted the settlement.
The matter serves as a reminder to FSPs to ensure that they carefully record and store all information as required by the Code of Conduct, said the Office.
“the complainant’s confirming that he understood the requirement”. So, the client knew and understood and acknowledged the requirement but still holds the broker responsible. Seems like you’re damned if you do and damned if you don’t.
In our industry, a sum of R50 000 is significant, particularly as we primarily earn through commissions. It is unfortunate that this intermediary faced such a situation. I trust that the intermediary’s professional indemnity coverage will help resolve the matter. According to FAIS regulations, maintaining a record of advice is essential for safeguarding the intermediary’s interests.