CR66

Delay in transfer of funds from one insurer to another – who is liable for the loss?

Background

When the complainant retired in 1999 he bought a living annuity from Insurer A. In September 2002 he decided to convert the living annuity to a fixed interest annuity and contacted his brokerage. A meeting took place in November 2002, the brokerage applied for quotations from various service providers and the complainant decided on a fixed interest annuity with Insurer B. According to the brokerage it was stated to the complainant that the specified quote was only valid for one week and the transaction process was explained to the complainant. He was informed that the process could take 4 – 6 weeks and that the assets will be in the market until such time that the transfer is finalised.

Discussion

The transfer had to be done in terms of Directive 135. On 28 November 2002 the brokerage forwarded all the required documentation to effect the transfer to Insurer A. On 12 December 2002 a master agreement in terms of Directive 135 was sent to Insurer B. On 18 December 2002 Insurer B confirmed that no existing master agreement of this nature existed between itself and Insurer A and such an agreement should first be entered into with Insurer A. According to Insurer B all authorized signatories from themselves were on leave and it could only be signed and finalised during January 2003. On 2 February 2003 Insurer B faxed the signed master agreement to Insurer A, but the Board resolution and proof of banking details were outstanding.

On 7 February 2003 Insurer A requested the outstanding documentation and confirmed that it will not proceed with the transfer until receipt of the outstanding documentation. On 13 and 17 February 2003 respectively Insurer B provided the outstanding documentation and on 4 March 2003 Insurer A paid the funds to Insurer B. At this stage the complainant’s investment with Insurer A has decreased due to adverse market conditions, and the annuity rates available to him in March 2003 were lower than what they would have been had his investment been transferred earlier.

Result

In this case Insurer B took the initiative and visited our office, stating that the earlier explanation that there was no-one available to sign the master agreement on Insurer B’s behalf, is not acceptable. Our office and Insurer B came to an agreement that a month was a reasonable amount of time for the transfer to have been effected, and that Insurer B should enhance the value of the investment to what it would have been at the end of December 2002, as well as to offer the complainant the annuity rates that would have been available to him in January 2003. The complainant was satisfied with this settlement.

AS
OCTOBER 2005