Background

1. The insurer and the deceased entered into a policy in terms of which the insured was covered for a funeral benefit of R30 000. The policy commenced on 1 July 2013. It provided that the premiums are payable monthly in advance by debit order on the date agreed to between the parties.
2. The deceased passed away on 13 November 2017 as a result of natural causes. When the complainant lodged a claim against the insurer, it was declined on the basis that the deceased had passed away before the expiry of the six months’ period.
3. The insurer explained that the waiting period arose due to the lapsing of the policy in April 2017. In support of their argument, they averred that there were insufficient funds in the deceased’s bank account in March and April 2017. A statutory notice was sent to the deceased by an SMS in March 2017 advising that her policy was in arrears and that a double premium would be debited on 2 April 2017.
4. The double premium was also not received. A second notice was allegedly sent by an SMS to the deceased advising that her policy had lapsed.
5. At reinstatement stage, the deceased advised the consultant who assisted her that she was surprised that her policy had lapsed as she had consistently deposited an amount of R120.00 into her bank account on a monthly basis whilst the monthly premium was R107.60. She denied receiving the SMS messages that were allegedly sent to her because she had lost her cell phone a long time ago.
6. The insurer agreed to reinstate the policy subject to the payment of the arrear premiums (because the deceased was over 64 years and therefore was not eligible for cover) and the waiting period of six months. The policy was reinstated with effect from 4 September 2017.
7. The complainant, aggrieved about the insurer’s decision, approached our office for assistance.

Discussion

8. We examined the deceased’s bank statements and found that there were insufficient funds in her bank account as she made cash deposits of R120.00 each month. It appeared that the money was consumed by the bank charges.
9. The case law dealing with statutory notices in terms of section 52 of the Act states that the very function of the notice is to alert the policyholder so that within the grace period, the default can be remedied. We were not satisfied with the way in which the insurer communicated with the deceased because an SMS can inadvertently be deleted and it can easily escape one’s attention. In our view the proper business method of communication would be to confirm important messages to the policyholder by means of a written letter (or email where possible) whether or not registered.
10. We pointed out that cell phones get stolen or lost from time to time. It followed that the insurer should, at the very least, have contacted the policyholder telephonically to ensure that the number was still working before sending the SMS.
11. It was clear from the bank statements provided to us that had the deceased received the notice, she would have remedied the default as she had made regular payments to her bank account. She was failed by her ignorance about how the bank account works. She just made sure that she paid an amount of R120 regularly to cover, as she thought, the debit order of R107.60 without realising that the bank charges would be much more than expected.
12. We concluded that the insurer should honour the complainant’s claim and pay the benefit less the arrear premiums, based on our equity jurisdiction. A provisional ruling was issued in this regard.
13. The insurer objected to our provisional ruling, relying on section 11 and 12 of the Electronic Communications and Transactions Act, 25 of 2002, and contended that data messages are legally recognised in terms of the law.
14. Moreover, it was argued that an interpretation to the effect that the insurer must ensure that the policyholder becomes aware of the non-payment of the premium, would place an onerous obligation on the insurer.
15. We obtained a legal opinion which concluded that the insurer did not comply with its obligation in terms of section 52(1) of the Long-term Insurance Act to notify the insured of the non-payment of the premiums by merely sending an SMS to the mobile number provided by the insured to the insurer, without obtaining proof that the insured received the notification.