More than 10000 life assurance policyholders or their beneficiaries complained to the ombudsman for long-term insurance in the 2017 financial year, mostly about the service or the benefits they received for their cover.

Just under 30% of the complaints about benefits and around 35% of complaints about bad service were resolved in favour of policyholders.

Not being aware what the fine print of your policy states can lead to nasty surprises, but every now and then assurers are found to be wanting when it comes to the terms of the cover, as these two cases from the ombud’s latest report reveal.

Beware of exclusions

If you opt for a no-questions-asked life assurance policy you need to be aware that an assurer can deny your claim if your death or disability is caused by a condition you had before you took out the policy – but the onus is on the assurer to make sure you are aware of any general pre-existing condition clauses.

In a case reviewed by the ombudsman for long-term insurance, the family of a policyholder who submitted a death claim on a credit life policy lost out because his policy contained a pre-existing condition exclusion clause. The policyholder took out the credit life policy covering his death, disability, retrenchment and dread disease in February 2007 and died about a year later from diabetes.

According to a provisional ruling made by the ombud’s office, a certificate provided by a medical doctor at claim stage revealed that the policyholder had been diagnosed with diabetes in November 2004, more than two years before the start of the policy.

A family member complained to the ombud’s office, saying the assurer should have checked the policyholder’s health status before accepting his application for cover.

However, the ombud says there are generally two ways in which policies are issued. Some assurers underwrite the policy, which means you are expected to have a medical examination or to answer a series of medical questions. The assurer uses this information to set your premiums and/or impose exclusions for the conditions disclosed.

Other assurers do not expect you to have a medical examination and ask no or only limited health questions. These assurers protect themselves by including a general exclusion clause for all pre-existing conditions in the policy contract, the report says.

In a provisional ruling in favour of the assurer, the ombudsman found that the policyholder’s pre-existing diabetes had materially contributed to his death and there was no evidence that the deceased had not been informed of the clause.

Waiting period

The fine print in a policy often trips you up but in some cases it helps you, as was the case in a complaint to the ombud about retrenchment benefits on a credit life policy on a store account, the report reveals.

The ombud’s closer look at the fine print showed the complainant did in fact meet the terms of an account protection plan policy on a department store account which covered the balance outstanding on the account in the event of her death, disability or retrenchment, a provisional ruling by the ombud reveals.

The policyholder was retrenched five months after she started working for an accounting firm. She notified the store about her retrenchment in the month after her last day at work and the store lodged a claim with the insurer on her behalf.

The insurer repudiated the claim relying on an exclusion clause in the policy which stated that no benefit would be paid for retrenchment if the policyholder had not been in full-time employment for six months immediately before being notified of the date of her retrenchment.

The ombud’s office established from the policyholder that she had been employed before she was hired by the accounting firm and she was able to provide payslips showing she had been in full-time employment before the accounting firm hired her.

The ombud says the policy wording did not require that the policyholder be in full-time employment for six months with the same employer.

The insurer accepted this argument and paid out a claim of just under R5200 to the policyholder which settled the outstanding balance on her store card, the report says.