CR293 Poor service Administration of policies by insurer

Poor service

Administration of policies by insurer –insurer agreeing to change its practice to provide efficient service.


The complainant, as the principal annuitant, held three policies that provided monthly annuities, and had been receiving the annuities since 2000. His wife was the second annuitant on the policies, and in terms thereof would only receive income on the death of the principal annuitant.

The insurer suspended income on one of the policies, claiming that no certificate of existence for his spouse had been submitted by her. The complainant had in fact submitted the certificate, and in acknowledging its error the insurer explained that the certificate had not been “uploaded”.

That of course resolved the complainant’s complaint, but the office remained concerned about the insurer’s practice of suspending payment of annuities to the principal annuitant when prior to his death no certificate is furnished to prove the existence of the second annuitant. The second annuitant would not after all receive any benefit from the policy until after his death.


While the policy conditions did require a second annuitant to furnish a certificate for the verification of his or her existence, the office’s main concern was therefore why the submission of such a certificate was necessary before the death of the main annuitant.

The insurer explained that the amount of an annuity payable to a second annuitant following the death of the principal annuitant is often less than the amount paid to the principal annuitant, and that it was necessary to call for a certificate of existence of the second annuitant in order to ensure that in such a case the second annuitant is not in error paid the same amount as had been paid to the principal annuitant. The insurer contended that, because their records needed to be updated, non-submission of a certificate therefore justified suspending the payments to the principal annuitant.

Our office was of the view, however, that the furnishing of a certificate is not necessary while the principal annuitant is still alive. If its only purpose is to ensure payment of the correct amount to a second annuitant after the principal annuitant’s death, that purpose would still be achieved if the certificate is called for at the stage of notification of the death of the principal annuitant.


We concluded that the suspension of payment of benefits before then would therefore be unfair. We also recommended that, in their procedure to obtain the information they require from a second annuitant, the insurer should in any event involve the principal annuitant as well.

The insurer agreed to change their procedure. The matter was settled and the insurer also agreed to pay compensation to the complainant for the inconvenience caused.


CR162 Poor service – Insurer providing confidential policy information to a third party


Poor service – Insurer providing confidential policy information to a third party


This was a complaint with a difference; a reminder that a woman scorned can cause a hell of a fury.

Ms A, the woman in question, had recently been divorced. Lots of love was lost between her and her ex-husband. She had an existing policy which he had effected several years before. As she was nearing 60, she decided to effect another policy with the insurer concerned to provide for her retirement. For some or other reason she was particularly anxious, so she informed the broker, that her ex-husband should not have access to the details of her new policy.

But her ex-husband’s own broker (who had in the meantime also become his new girlfriend) was up to the challenge. She telephoned the insurer’s call centre pretending to be Ms A. She quoted her and “her husband’s” existing policy numbers to the consultant who informed her that she could not be provided with details of “her husband’s” policy but nevertheless volunteered the information that she had another policy herself, the number of which she disclosed. The insurer faxed the policy values of both policies to her ex-husband’s “broker”.

Ms A, when she discovered what had happened, was livid. She could not understand how the insurer could have provided information of this nature to a third party without verifying the contact details that were given and did not correspond with the information on the new policy. The insurer took the view that it acted in good faith and suggested that Ms A take the matter up with the broker concerned.

Ms A was particularly upset as her ex-husband was using the information to withhold money from her. She complained to the office who again approached the insurer, who immediately issued a letter of apology to Ms A and indicated that it would take further action against the fraudster. At our suggestion it also offered compensation of R1 000. Ms A rejected the offer stating that “The ‘inconvenience’ I suffered is possibly my share of a R1.5m pension”!

At this point Ms A insisted that the new policy be cancelled and that all premiums paid be refunded to her, her reason being “I feel I need to invest in a company that will respect my confidentiality at all times”.


The office did its best to smooth the ruffled feathers, put the request to insurer and attempted to persuade the insurer to increase the compensatory award to R2 000. We also suggested that the conduct of the broker be referred to the FAIS Ombud. The insurer refused the request for cancellation and a refund of all premiums paid, saying “As we have no voice recordings in place to identify, whether the caller is in fact our policyholder, it is impossible to determine whether the caller is indeed our client. Our Call Centre Staff has no training in Forensic Examinations and can therefore not determine a fraudulent action during a telephone conversation”.

At an adjudicators’ meeting it was decided that, as the office made every effort to assist Ms A, we could take the matter no further. Cancellation of the policy and a refund of premiums from inception was not in our view justified. It was then that Ms A directed and vented her fury on the poor adjudicator who had to inform her of the decision.

And that, as far as the office was concerned, was the end of an unhappy story.


We did not hear from Ms A again.

April 2006

CR128 Bad service – compensation

Bad service – compensation


The complainant added her sister to an existing funeral policy on 7 August 2001. When her sister died on 12 October 2002 she submitted a claim on 16 October 2002 to which, she said, the insurer did not respond. She enquired but all she got was “promises, promises every time which are never fulfilled.”

She eventually lodged a complaint at our office and it was referred to the insurer on 3 June 2004. After several reminders the only response received from the insurer was that the deceased had died within the six-month waiting period (the date of death was wrongly indicated by it as 31 December 2001).

Upon further enquiries the insurer then raised a new defense, namely that the claim was declined because the deceased was not covered on the policy and no premiums were received for the deceased. The complainant then provided proof that the deceased was indeed covered and on 18 February 2005 we informed the insurer accordingly. After several further reminders, the insurer informed us on 6 April 2005 that the claim would be paid. On 30 July 2005, after a further three reminders, the insurer advised that they could only process the claim upon receipt of the death claim papers.


The complainant provided us with the claim documentation on 19 September 2005 and we sent the documentation to the insurer on 21 September 2005. On 9 November 2005 the insurer raised a fresh defense and informed us that they would not be paying the claim as the claim was not lodged in time. They stated the following: “As per the rules…. no claim will be paid if a claim is received by the call center 90 days after the date of death, or if all documentation as requested by the call centre are not received with in the 90 day period, the claim will be treated as null and void.” Once again, the defense had no merits as the complainant could show that she did lodge the claim in good time.

After discussing this case at an adjudicators’ meeting, we informed the insurer that since they had admitted liability on 6 April 2005 it was our opinion that they should pay the claim with interest, together with compensation in the amount of R1 500. The insurer thereupon responded by saying that due to personnel changes, they had only then began to investigate the claim properly and that it should never have been admitted in the first place as it was not lodged in time.


At a further adjudicators’ meeting the provisional ruling was made final and the case was marked as ‘incompetent’.
April 2006

CR129 Funeral insurance – non-conclusion of contract – estoppel – compensation

Funeral insurance – non-conclusion of contract – estoppel – compensation


The complainant was an existing policyholder with the insurer. In April 2004 he completed an application to add his mother to his existing policy for cover of R10 000. This would have increased his premiums from R58.50 to R332.50.

He handed the application form with a signed stop order to a sales manager of the insurer. For some unexplained reason the application form was not processed by the insurer. In June 2004, having noticed that there were no deductions from his salary in respect of the increased premiums, he enquired from the sales manager and was reassured, so he said, that it took time for such deductions to be processed. Since the sales manager was no longer in the employ of the insurer the insurer could not confirm or deny that such enquiries were made.

It was common cause that the application form and stop order were received by the insurer but were not processed and that no notification was sent to the complainant’s employer for an increase to the premium.

In May 2005 the complainant’s mother died. A claim was made but was declined by the insurer.


It was clear that the complainant could not assert a claim on the policy itself since his application was never accepted by the insurer. An endorsement to the contract was accordingly not made. It is true that the complainant was misled by the sales manager, when he enquired, but it was not, in our opinion, reasonable for him to have allowed matters to rest from July 2004 until May 2005. Long before his mother died, he should have realized, particularly after he had made enquiries, that matters had not been rectified. That being the position the insurer could not be held to have been estopped from raising the non-conclusion of the amendment of the contract as a defense to the claim on the policy.


The complaint was accordingly not upheld, but in terms of Rule 3.2.5 we requested the insurer to pay an amount of R1 500 to the complainant for material inconvenience or distress or financial loss suffered by the complainant as a result of error, omission or maladministration on the part of the insurer.

The insurer agreed to pay the suggested compensation.
April 2006

CR98 Ambiguity in a policy wording


Ambiguity in a policy wording


The policy in question was a retirement annuity. The issue was that nowhere on the schedule of rates did it state the frequency of annuity payments. The rates quoted were intended to be annual, but the complainant chose to assume that they were monthly. A qualifying statement under the schedule of rates stated “…The pension will be payable monthly in arrears…”. The insurance company took the view that the table simply reflected the rates to be used to calculate retirement benefits at the policyholder’s various ages. They argued that the table was a progression in age and this in itself qualified the rates as being annual. Furthermore, the dictionary definition of annuity is a sum payable in respect of a particular year.


It is an established principle of interpretation that words and phrases that are unambiguous will not be departed from purely because it would lead to onerous obligations for one or other of the parties; but if the words or phrases are ambiguous, considerations of equity and reasonableness must be applied.

As stated in Rand Rietfontein Estates Ltd v Cohn 1937 AD 317, a court “will not, unless the intention of the parties is manifest, so construe the contract as to give one of the parties an unfair or unreasonable advantage over the other”. If the complainant’s interpretation of the contract prevailed, the effect would be grossly unreasonable and inequitable. If the rates quoted in the schedule were taken to be monthly the result would be that the purchase price of R87 460 would be exhausted in less than one year. This would hardly be an equitable construction.


The Ombudsman took the view that, bearing in mind the magnitude of the ambiguity, the complainant knew subjectively or ought as a reasonable man to have known, that there was an area of doubt regarding the frequency of payment. In the circumstances the complaint was not upheld.


October 2005

CR97 Compensation for late payment of death benefits caused by unjustified delay by an insurer.


Compensation for late payment of death benefits caused by unjustified delay by an insurer.


Eleven years after the death of the deceased/policyholder, we received a complaint from a family member that the insurer insist that the claimants provide it with copies of the inquest record and blood samples before they would consider payment of accident benefits. A rather surprising response to our enquiry to the insurer reads – “In order to ensure a timeous and satisfactoriy resolution of this matter, the following action is being taken so far:
We confirm that we are still awaiting a full inquest and blood test”. The insurer confirmed that they have requested these from the family members of the deceased. The insurer, however, was provided with a copy of a report on a medical/legal post mortem examination which confirmed that the deceased who was a security guard, died as a result of multiple bullet wounds.

The attention of the insurer was drawn to 5.3 under the heading “Fishing Expeditions” in the Ombudsman’s 2002 annual report. In that report it was emphasised that the onus to obtain information which confirms the right to deny liability or decline a claim, generally speaking, rests on an insurer. Repeated requests to family members without any attempt to obtain such information from official sources directly is not considered to be sufficient. The available information furthermore does not support a reasonable suspicion for reliance on a contractual exclusion of “contraventionof the criminal law”.

In response the insurer advanced as further justification for the delay that one of the nominated beneficiaries was a minor and that the insurer requested that “a Trust Fund be opened for the minor beneficiary”.

It was pointed out to the insurer that there is no basis for the requirement of the setting up of a Trust Fund. The claim form in respect of the minor was completed by that minor’s mother and natural guardian.


Our evaluation of this matter was that the grounds advanced for non-payment of the claim were totally unsubstantiated and unjustified. Under the circumstances, the insurer was requested and agreed to pay compensation calculated at 15% per annum from 90 days after the date on which the claim was submitted to the date of payment.

October 2005