CR172

Annuity – time for determination of the amount : at time of death or claim? – procedure – rule 3.4.1

Background

1. The life assured had a living annuity (equity linked annuity) with the insurer. The complainant was the beneficiary on death of the annuitant. No claim was lodged with the insurer at the time of the annuitant’s death on 28 December 1998. According to the complainant the insurer did not query the fact that the annuity was suspended after the death of the annuitant.
2. When enquiries were made on the 28 February 2006, the value of the annuity stood at R113 866,80.
3. Yet when the claim was lodged shortly afterwards the beneficiary was advised that only R42 132,54 was available.
4. The insurer based this value on the value of the annuity at the date of death, not at the date of claim.
5. The complainant claimed the value on the date when the value was advised to him i.e. 28 February 2006.

Insurer’s response

6. The insurer did not initially respond to our enquiry nor to our reminders.
7. In terms of our normal practice we then made a preliminary determination on the documentation on file, in favour of the complainant. The insurer was given fout weeks to challenge our preliminary determination. It failed to do so and the determination became final.
8. Upon notification of the final determination the insurer sent us a response raising, for the first time, the following issues :
• that the amount due on death is the value at the time of death and that this was the amount which should be available for transfer into a new annuity;
• that the insurer was willing to pay interest of R21 672,65 on the amount of R42 132,54.
The insurer did not provide a policy but merely alleged that it provided that the value on date of death was the value payable.

Discussion

9. We advised the insurer that as we had made a final determination and, being functus officio, that we were unable to change it. The only avenue available for recourse was to appeal the decision in terms of our internal appeal process.
10. It is unfortunate when our office has to make a determination without the benefit of “hearing” both sides. However, we cannot delay complaints because insurers do not respond to our enquiries. We allow insurers four weeks to respond to our initial enquiry, after which we send a reminder. If we do not receive a response within a week we send a further reminder advising the insurer of our intention to make a determination within a week. On non-receipt of a response we then make a determination. Our first determination is always in a preliminary form giving both parties a further opportunity to raise fresh points for consideration. There can be no question but that we gave the insurer ample opportunity to respond to the complaint.
11. Apart from the procedural aspects of the complaint, what struck us as unusual was that an insurer would pay the value on date of death and that the benefit of the growth subsequent to death would then fall into the insurer’s hands. On making enquiries at some other insurers and linked investment companies which administer linked annuities, this appeared to be out of line. As matters turned out we were not required to decide the point since the insurer decided not to appeal.

Result

The insurer accepted the determination.

JP
November 2006