Ensure you really are insured

You should not assume you are insured if you have not received confirmation that cover is in place, a recent complaint that came before the financial advice ombud shows.

A man whose car was stolen complained to Noluntu Bam, Ombud for Financial Services Providers, that he was under the impression that his vehicle was insured after he had contacted an insurance broker and completed a policy application form.

However, the ombud dismissed the complaint, saying it is difficult to see how Leshie Mojela had come to that conclusion, because:

* There had been an outstanding issue on his application form;

* Mojela had not established what the premiums for the insurance cover were; and

* The complainant had not paid any premiums.

Bam found that Mojela’s insurance broker, Estene Brokers in Secunda, and its key individual, Christine Botha, had been “lackadasical” in its financial service to him but ruled that Estene Brokers was not responsible for the loss Mojela suffered after his car was stolen.

According to the ruling by the ombud, Mojela bought a new VW Polo in August 2007 and insured it with Outsurance.

At the end of that month, Mojela called Estene Brokers and said his premiums were “onerous” and requested new insurance for his vehicle. Botha faxed him a quotation, which Mojela signed and faxed back to Estene Brokers, the ruling says.

In early September 2007, Estene Brokers arranged for a tracking device to be installed in Mojela’s vehicle.

On September 28, 2007, Mojela’s vehicle was stolen in the Johannesburg central business district. It was recovered on the same day, but the vehicle had been damaged, and the repair costs were estimated at R72 781, the ombud’s ruling says.

According to the ombud’s ruling, Mojela said he cancelled his Outsurance policy on Botha’s advice before his vehicle had been stolen, and Botha only informed him in early October that his application for a new policy with Mutual & Federal had been turned down.

He wanted Estene Brokers to compensate him for the damage to the vehicle, as well as for the panel-beater’s storage costs of R200 a day.

In her response to the ombud, Botha said she submitted the proposal to Mutual & Federal’s administrator, Econocom, on August 30 and was waiting for the policy schedule to be issued when Mojela’s vehicle was stolen on September 28.

According to the ruling, Botha told the ombud she was informed only on October 6 – after submitting Mojela’s claim to Econocom on October 4 – that the application for cover had been declined.

However, Econocom told the ombud that they had telephonically informed Botha on August 28 that they would not accept Mojela’s application, because he was under the age of 26 and their cover was not available to drivers under that age.

The recorded conversation was provided to the ombud.

Botha also alleged that, had the cover been in place when the vehicle was stolen, the claim would have been denied, because Mojela had failed to disclose that he was using the vehicle for business purposes.

Mojela told the ombud that he had told Botha that he used his car a few times a month for business purposes and that she had undertaken to establish whether he needed to insure the vehicle for private or business use.

Bam says Botha was unable to provide her office with documents relating to the financial service she rendered and, in particular, provided nothing to show that Mojela had not disclosed that he used the vehicle for business purposes. On the quotation form, the section relating to the use of the vehicle had been left blank.

Bam says this indicates that Mojela could not have been under any misapprehension that he was insured, because the insurer had not yet been provided with the necessary underwriting details.

Bam says she has no doubt that Botha did not act with due skill when she failed to inform Mojela that his application for insurance had been rejected and that she had contravened the code of conduct under the Financial Advisory and Intermediary Services (FAIS) Act.

However, in considering whether Botha’s actions caused Mojela to sustain a loss, the ombud says, the question arises whether Mojela’s impression that he was insured with Mutual & Federal was reasonable.

Mojela had signed a proposal form only and it was incomplete, because, by Mojela’s own version, he was waiting for Botha to ascertain whether he needed to insure his vehicle for business or private use, Bam says.

Mojela never claimed that Botha informed him that he was insured and he did not contact her for more than a month, the ombud says.

Mojela’s belief that he was insured does not make sense, because he did not know what premium was payable, received no requests for premiums and made no payments, Bam says.

“His conduct clearly indicates that, although he was desirous of being insured for his vehicle, he was not in a hurry to commit financially,” she says.

Bam says it may well be that Botha advised Mojela to cancel his policy with Outsurance, but this was all the more reason for him to have established from Botha that the new cover was, in fact, in place.

Bam says it is unreasonable for Mojela to have assumed that he was insured, and although Botha’s “lackadaisical conduct” contravened the FAIS Act’s code of conduct, there was no connection between her conduct and the loss sustained by Mojela.

CONTACT

The Ombud for Financial Services Providers is Noluntu Bam

Telephone: 012 470 9080

Post: PO Box 74571, Lynnwood Ridge, 0040

Email: info@faisombud.co.za

Website: www.faisombud.co.za