Funeral benefit disputes keep ombud busy

In a year that brought the insurance industry into the spotlight with high profile cases drawing the attention of the media and social media, the Ombudsman for Long-term Insurance (OLTI) received a record number of complaints.

OLTI received 11 768 written requests for assistance in 2018, an increase of 1 000 requests compared to the 10 768 in 2017.

“Of those requests, 5 978 were complaints which fell within our jurisdiction – this was an increase of 10% compared to the 5 435 complaints received in 2017,” ombudsman, Judge Ron McLaren said.

There were more complaints about funeral benefits than any other type of benefit.

“We set a new benchmark, with 91% of complaints finalised within six months,” said Judge McLaren.

This was a 6% increase on the 85% achieved in 2017 and Judge McLaren said this was despite complaints becoming increasingly more complicated to resolve.

Insurers are given an opportunity (transfers) to try to resolve the complaint directly before the OLTI intervenes.

As many as 31.5% full cases were resolved partially or wholly in favour of complainants.

That together with the 1 132 transfers settled directly with complainants by insurers means that in 40% of complaints there was relief for complainants.

Payments in lump sums to the value of R185.8 million were recovered for complainants.

Compensation of R632 737 was awarded to 160 complainants for poor service by insurers.

“The annual report would not be complete without a full assessment of the Ganas/Momentum case, where we ruled in favour of the insurer.”

Momentum Life declined an application for a R2.4m life insurance payout for Nathan Ganas, who was killed while trying to protect his wife, Denise, during a hijacking.

The Ganas’ claim was declined by Momentum on the grounds he had not disclosed that he was diagnosed with raised blood sugar levels which may have occurred before he completed his application for the policy in 2014.

“We conclude that the legislature should reconsider the current non-disclosure legislation,” the judge said.

There were three final determinations against Alexander Forbes Life and in one case it was ordered to pay R7 500 compensation “for the suffering of distress, inconvenience and financial loss”.

“The delays this office experienced in the complaint handling by Alexander Forbes, the incomplete responses and lack of supporting documentation from them added to the frustration the complainant has experienced throughout this stressful period in her life,” the final determination said.

“We note an increasing awareness on the part of the insured to ask for compensation for poor service, although the requests are not usually articulated explicitly. A common misconception by complainants is that the amount of compensation should equal the policy benefit in question. Complainants also often express the misguided wish that the insurer should be punished by the compensation award.”

The judge pointed out that despite Treating Customers Fairly (TCF) being part of insurance regulation, some insurers demonstrate the opposite.

In one case involving a funeral claim for a stillborn baby the insurer had unfairly refused a
R1 000 payment until the ombud intervened*.

OLTI also relied on fairness in instructing Sanlam Developing Markets to pay a funeral claim on the death of a second cousin who had been described as a cousin by the complainant.

The term “cousin” includes second cousins in certain cultures.

“During 2018 there were discussions with the Ombudsman for Short-term Insurance (OSTI) and the National Treasury about a possible amalgamation of OSTI and this office to provide consumers with a single point of entry for insurance complaints. But the offices of OLTI and OSTI will continue to operate separately under the umbrella of a single insurance ombudsman.

“Our office follows an ‘open door policy’ for complainants and insurers alike. We have interaction with insurers in the form of training sessions and consultations on matters of mutual concern and we frequently meet with complainants for discussions and we reach out to the public. ‘Money Smart Week 2018’ launched by the National Treasury and the Financial Sector Conduct Authority as an educational awareness programme, aimed at improving financial literacy in the country, is an example.”

*A grieving mother wrote to the OLTI after an insurer had refused to pay a funeral benefit of R1 000 for her stillborn baby that she had carried to term in June 2014.

The insurer declined to pay because a claim had to be submitted within six months of the event.

The complainant explained that she had been unaware of the funeral benefit for a stillborn baby which was provided by her employer-sponsored insurance scheme.

She only became aware of the benefit when the broker to the scheme gave a briefing to staff members about their benefits.

“When we submitted the complaint to the insurer it again declined the claim based on its late submission.

“When we requested the insurer to advise us what prejudice it would suffer if the claim was admitted the insurer made enquiries about the truth of the complainant’s statement. No evidence could be found that the complainant had received any benefit.

“The insurer then agreed to pay an ex gratia amount. In our view the insurer should have investigated the circumstances surrounding the late submission at claim stage or, at the latest, when a complaint was first sent to it by our office and should not have waited for further prompting from us,” the ombud said.

Visit www.ombud.co.za or call 086 010 3236 to contact the ombudsman.