CR111

All material facts not disclosed – advice accordingly not appropriate.

Background

During July 2002 the complainant approached two financial advisers employed by the insurer to obtain advice as to how to invest his retirement funds. Upon their advice he invested his funds in a living annuity in a monthly bonus fund with the insurer. One of the reasons he chose that portfolio was because of the declaration of bonuses. In February 2003 he was informed that the fund did not declare any bonuses for that year.

He then decided to switch his funds to another portfolio. However, the insurer informed him that he had to give four months’ notice of such switch if it had to be done against the book value. If he did not give four months’ notice and wanted the switch done immediately, it would have to be done at either book value or market value, whichever was the lowest. This would have resulted in a 14% loss to the complainant.

The insurer further stated that they sent a letter to all policyholders in December 2002, informing them of the four months notice period. According to the complainant he would not have invested in the monthly bonus fund if he was aware of the four month waiting period. In light of all the evidence it was accepted that he was not aware of this at application stage.

Discussion

The complainant sought professional advice from the insurer. This meant that the advice had to be appropriate. It was our opinion that the advice was not appropriate because a material aspect of the proposed investment was not disclosed to him, or at the least, not properly explained to him. Even though the application form has a clause which stated that the insurer would not be liable for any loss suffered by the policyholder due to “enige tydsberekeningstandaarde, praktyke en prosedures….”, the fact remained that the complainant was not informed of the waiting period and that this was not appropriate advice.

Result

The matter was settled after the parties met at our office for the purpose of discussing settlement of the matter and a substantial payment was made to the complainant.

AS
October 2005