CR278 EQUITY (Cross reference from “Group schemes”)

(Cross reference from “Group schemes”)

Failure to apply for paid-up policy upon retirement – insured unaware of the policy provision that he should make such application.


A labour union had arranged for a group funeral scheme, and the policyholder later became a member of the scheme. The policy required that, if a member wished to remain covered after his retirement he should apply for a paid-up policy when taking retirement. The policyholder retired but did not make such an application. Upon his later death his son, the complainant, lodged a claim for the death benefit, which was declined because he had failed to apply for a paid-up benefit when he went on retirement.

The complainant contended that:

1. The policyholder had not been directly provided with the terms and conditions of the policy; and
2. He had been illiterate and could not have been expected to know the policy rules without being alerted thereto by the insurer.

In response the insurer contended that it had asked labour union shop stewards to advise members of the group scheme about policy provisions and requirements, including the need to apply for a paid-up policy on retirement. There was no certainty, however, that the information had in fact been relayed to the policyholder, and if it was that it was correctly conveyed to him.


The office recognised that any change to such a policy term would affect the insurer’s fundamental assumptions on pricing as well as the solvency of its paid-up reserves, and considered that it was not feasible to interfere with the term whereby the paid-up benefits must be applied for on retirement.


The matter nevertheless deserved an equitable approach. We engaged with the insurer, who undertook to pay this particular claim on an ex gratia basis. Furthermore, we reached an agreement with the insurer concerned that the issue of paid-up benefits on retirement be further discussed with the industry body, ASISA, in order to avoid similar occurrences in the future.