CR367 Conclusion of contract Policy correctly issued?

Conclusion of contract

Policy correctly issued?

Surrender of policy – did applicant for surrender have authority to act?

A complainant wrote to us complaining about the fact that her insurance adviser had partially cashed in her policy. She stated that the adviser had owed her money and to redeem his debt he paid the premiums on the policy he sold her. The insurer countered the complainant by stating that the complainant was merely the insured life and the adviser was the owner of the policy. The application form indicated that the adviser was the complainant’s brother and premium payer. The insurer had a practice of making the premium payer the policyholder even though this is not clearly indicated on the application form. (The insurer had changed this practice subsequent to the issue of this policy).

The insurer suggested that the complaint was a private family matter between the parties and that they should settle it between themselves. The insurer did not comment on the complainant’s allegation that she had received all the notifications, updates etc, during the eleven year term of the policy which correspondence had reinforced her belief that she was the owner.

The insurer subsequently, after we raised certain questions, interviewed the adviser who conceded that the complainant was his half-sister, not his sister. He also said that the complainant had signed the encashment form together with him. The complainant denied both these allegations and stated that her signature was a forgery done by means of a “cut and paste” process and that the adviser was not related to her.

We contacted the insurer and pointed out that there was a factual dispute in the case. We suggested a hearing and predicted that whoever was not telling the truth would probably not be willing to attend. The adviser “blinked first”, he refused to attend and after some pressure from the insurer agreed to repay half the surrender value. The complainant refused to accept the offer. The adviser then offered the full amount which was accepted by the complainant.

The adviser then reneged on his promise and said he could only pay in instalments as he was short of cash. The insurer paid the complainant and recouped the money from the adviser who was also investigated by the insurer’s compliance department.

April 2016