“The Office of the FAIS Ombud is committed to resolving complaints in a procedurally fair, informal, economical and expeditious manner, with reference to what is equitable in all circumstances. In this vain, the FAIS Ombud always explores every available avenue to resolve a complaint between the parties on an informal basis, without the need to formally resolve the matter by way of a determination.” These are the words of the FAIS Ombud in a recent media release.
One of the latest complaint resolutions showcases the Ombud’s successful resolution by way of a conciliated settlement. The Ombud stated that the specific case does address a few significant issues that the Ombud’s Office believes need to be highlighted.
The Complaint
The complainant was the executor of the estate for the late Mr X. Mr X passed away on 13 April 2018. Whilst finalising the affairs of the estate, the complainant discovered that the deceased’s existing life insurance policy had been cancelled and replaced with a new policy with another insurer. The complainant subsequently submitted a claim to the new insurer, which was rejected as the insured had passed away prior to the inception of the policy.
On further investigation, the complainant determined that the application for the replacement policy had been completed on 20 February 2018 and that there was correspondence dated 14 March 2018 from the respondent instructing the deceased to cancel his existing policy.
This letter was signed by the deceased and forwarded to the existing insurer, however the replacement policy had at that time not yet incepted. The replacement policy was supposed to incept on 1 April 2018, however during the underwriting process there were concerns surrounding the results of the deceased’s Body Mass Index (‘BMI’). The results of the deceased’s BMI resulted in the new insurer issuing an ‘Acceptance of Offer Letter’ which saw the inception date of the policy extended to 1 May 2018.
As a result, when the deceased passed away on 13 April 2018, there was no policy in place. The complainant was of the view that the deceased had not been correctly advised to cancel the existing life insurance policy before the application for the new policy had even been accepted, let alone the new policy having incepted. The complainant therefore held the respondent liable for the losses incurred as a result.
The Ombud’s reaction
The Ombud’s Office agreed with the view of the complainant and the fact that the respondent had not acted with the required due skill, care and diligence in the best interests of the deceased as required in terms of section 2 of the General Code of Conduct for Authorised Financial Services Providers and Representatives. The Ombud’s office communicated their findings to the respondent, who accepted responsibility for the losses incurred by the complainant and provided the complainant with an offer of R1 000 000, the cover amount, in full and final settlement. The offer was accepted by the complainant.
Emphasis on replacement policies and TCF
The Ombud’s office pointed out that whilst the facts surrounding this matter would appear to have been rather straight forward, and highlight the additional duty of care that a Financial Services Provider (‘FSP’) must exercise during the replacement of an existing life assurance policy, the significance of this matter lies in the respondent’s willingness to resolve the complaint for the total loss incurred, despite this amount exceeding the Ombud’s Office’s R800 000 jurisdictional limit.
According to the Rules on Proceedings of the Ombud’s Office it do restrict the jurisdiction of the Office to the investigation of complaints where the losses incurred do not exceed R800 000, and any matter received that does exceed this limit would require that the complainant confirm in writing to forgo any amount in excess of R800 000. However, the very same rules do provide that this jurisdictional limit may be exceeded should the respondent agree to it in the interests of proceeding with the investigation.
The Ombud’s office emphasised that it is therefore refreshing to note that especially during this time where there is a heightened focus on treating customers fairly, that a respondent has chosen to not only acknowledge the negligence that resulted in the losses incurred, but was also willing to resolve the matter in full. “It is this type of collaboration between industry and an institution such as this Office, where the interests of the client are first and foremost, that will contribute further towards increasing the integrity of the financial services industry. Something that is not only part of the mandate of this Office, but an aspect that we take very seriously and we encourage more FSPs to follow the example above”, the Ombud’s office commented.
“In accordance with the provisions of the Financial Services Regulation Act, this Office has a duty to report any concerns surrounding the conduct of FSPs during the investigation of a complaint. This Office does however recognise the importance of also highlighting the positive actions of FSPs in making a tangible contribution towards treating customer fairly”, the Office concluded.
Lessons learnt
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. The fair treatment of customers underpins this.
Click here to access the FAIS Ombud website. Determinations as well as other FAIS Ombud publications can be very educational in every day financial services practices.
