A brokerage insurance company has been ordered to pay their client just over R300 000 for failing to make it clear that a satellite tracking device was a policy requirement for theft cover on the client’s vehicle.
On 11 December last year, the Office of the Ombud for Financial Services Providers (FAIS Ombud) upheld an earlier recommendation – in terms of section 27(5) (c) of the FAIS Act) – by the FAIS Office, instructing Badie Jacobs Insurance to settle Dr Luzanne de Beer’s failed insurance claim following the theft of her vehicle.
In his determination, Advocate John Simpson, the Ombud for Financial Services Providers, stated that had the company complied with its duties – as set out by the General Code of Conduct – there “is a high probability” that De Beer would have installed the device, and the insurance claim would have been successful.
“The Respondent’s (Badie Jacobs Insurance) failure to comply with the Code led to a situation where the Complainant (De Beer) was not reasonably aware of the requirement and did not take the necessary steps to comply with the requirement,” Simpson said.
How it all went wrong
On 5 February 2016, De Beer purchased a Toyota Land Cruiser 76 4.2 and added it to her insurance policy through Badie Jacobs Insurance Brokers, with Quicksure as the insurer, underwritten by Old Mutual Insure.
The vehicle was stolen from her workplace on 30 July 2018. When De Beer submitted a claim for R312 400 to Quicksure, it was rejected, citing the absence of a satellite early warning device on the stolen vehicle.
Despite filing a complaint with the Ombudsman for Short-Term Insurance (OSTI) against the insurer, the complaint was dismissed.
Subsequently, on 29 October 2018, De Beer filed a complaint against the insurance brokers with the FAIS Office, alleging that she was not properly informed about policy requirements, ie the installation of a satellite early warning device.
De Beer also claimed that there was no communication regarding the device or a request for the installation certificate from the brokers.
From the onset, the brokers denied liability and submitted that De Beer was aware or ought to have been aware of the satellite early warning device policy requirement.
The brokers claimed that De Beer signed the policy documents after being informed about the need for a satellite early warning device. They argued that the fact that De Beer had provided inputs, which were incorporated in the contract, was indicative of this. Additionally, the brokers presented a letter from 27 November 2017 sent to clients, including De Beer, urging them to verify vehicle descriptions.
The letter emphasised that registration numbers, trackers, or any required satellite tracking system must be operational and active as per policy requirements.
On 24 August 2023, the FAIS Office sent a recommendation to the brokers, advising them to settle the claim. The brokers responded on 7 September 2023 that they intended to appeal the decision and that they were seeking legal advice on the matter.
In stepped the FAIS Ombud.
What the Code of Conduct says
The General Code of Conduct for authorised financial services providers (FSPs) and representatives (“the Code”) places a duty on FSPs to disclose any material terms of the contract (Section 7 (1) (a)).
It further states that a provider must provide “concise details of any special terms or conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, restrictions or circumstances in which benefits will not be provided” (Section 7 (1) (c) (vii)).
In addition, “a provider must, subject to and in addition to the duties imposed by section 18 of the Act and section 3 (2) of this Code, maintain a record of the advice furnished to a client as contemplated in section 8, which record must reflect the basis on which the advice was given… (Section 9(1))”.
In his determination, Simpson said the Code placed an obligation on the FSP to place the client in a position to make an informed decision and take the appropriate action where necessary. However, he concluded that there was no evidence of the brokers providing any explanation to De Beer regarding the satellite device or the serious consequences of it not being installed, nor of advising De Beer of the unusual and special condition relating to the satellite device.
The Ombud said there was also no evidence of any record of advice reflecting the information or advice provided to her.
Section 2 of the Code states “a provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry”.
According to Simpson, based on the Office’s experience, an early warning satellite tracking device is not a typical requirement for theft cover on all vehicles. It usually applies to specific vehicles based on value and exceptional risk factors.
“The Respondent seeks to blame the Complainant for not reading the policy, however, it has not provided any evidence of complying with the Code. There is no evidence of it rendering services with due skill, care, and diligence.”
The Ombud said it appeared that the brokers regarded themselves “as a mere conduit or post-box” for the De Beer’s transaction with the insurer but that, as per the Code, their duties and responsibilities extend far beyond that.
“The Respondent is the expert in the field and is expected to provide all the information and assistance necessary to ensure that the Complainant is well advised and informed regarding a special condition such as an early warning satellite tracking device. It will then be reasonably expected to follow up regularly to check whether the device was installed and to send proof of the installation to the insurer.”
Simpson ruled that sending a general letter to all its clients and the policy schedule to De Beer also did not satisfy the requirements in terms of the Code.
The vehicle was insured for R312 400, subject to a 3.5% excess of R10 934.00. The amount the insurance claim would have paid out had it been successful was R301 466.
Badie Jacobs Insurance was ordered to pay De Beer this amount as well as interest at a rate of 11.75% per annum from the date of the determination to the date of final payment.
The brokerage insurance company has the right to apply for the reconsideration of the decision by the Financial Services Tribunal within 30 days of the Ombud’s determination.
