When you take out insurance through a financial adviser, it is the adviser’s responsibility to ensure that the product meets your needs and that you don’t suffer a loss through poor administration or negligence by the adviser in the processing of a claim.
These are a few of the protections you enjoy under the Financial Advisory and Intermediary Services (FAIS) Act, which regulates the rendering of financial advice.
Noluntu Bam, the Ombud for Financial Services Providers, handed down two determinations last month highlighting the responsibilities financial advisers have to you when you buy insurance.
Following a complaint against Mpumalanga-based financial adviser Anshe Kruger, Bam found that Kruger had sold a short-term insurance policy to a client she had neither met nor even spoken to.
The insurance was for Coolmac First for Service, an air conditioning and refrigeration business in Mpumalanga, to cover a vehicle used by the business to transport equipment and tools. Coolmac also wanted cover for the contents of the vehicle, and this requirement was put in writing by the client in an email to Hennie Jacobs, a broker who worked for a life assurer and referred business to Kruger.
A director of Coolmac had received a quote from another broker and forwarded it to Jacobs for his opinion. Jacobs, in turn, sent it to Kruger, urging her to “do the same or improve on it”. Kruger issued Coolmac with a quote for cover from Santam and sent a broker letter of appointment to Jacobs to send to Coolmac.
Almost a year after the policy commenced, Coolmac’s vehicle was broken into and tools were stolen from it. A claim was submitted to Santam, but it was rejected, because the items stolen should have been specified in the all-risks section of the policy.
Coolmac lodged a complaint against Kruger with Bam’s office. In her defence, Kruger said that in terms of her business arrangement with Jacobs, she was not at liberty to contact his clients directly. All business, including the collecting of information, had to be done via him. She said she worked on the basis that the original quote forwarded to her was in accordance with the client’s requirements.
She contended that the client was at fault for failing to comply with the requirements of his policy. “He neglected to study his policy and now wants to put the blame on me. I never spoke to the client myself and everything was handled by my office,” she told the ombud.
Bam took a dim view of the adviser’s response. “On her own version, she did not know her client,” the ombud says. At no stage did Kruger advise Coolmac – let alone advise the client that the tools had to be listed in the all-risks section of the policy in order to be properly covered.
Bam says Kruger citing her arrangement with Jacobs as the reason she could not gain access to the client was an attempt to escape liability, and describes the business relationship between Kruger and Jacobs as “unlawful”. The “undisputed fact” is that she made no attempt to contact the client to ascertain his instructions. This failure was bound to result in the latter’s prejudice, Bam says. Kruger acted in line with her business arrangement with Jacobs rather than in the interests of her client. “Whichever way one views [Kruger’s] conduct, it fails the bare minimum threshold of advice as defined in the FAIS Act.” Kruger was duly ordered to pay Coolmac R17 756.
LATE SUBMISSION
Bam also ordered financial adviser Maurizio Scolari, of Aquarius Insurance Consultants in Northriding, to pay a client R20 173 after the client’s claim was rejected because Scolari failed to submit it on time.
Scolari’s client, Luke Carazzo, was insured with Saxum through Niche Administrators. In March 2009, the Innovation Group took over the administration of Saxum’s claims.
Following a car accident in November 2008, Carazzo submitted a claim to Scolari, who was supposed to send it to Innovation. But Innovation told Carazzo it had never received the claim. Scolari insisted he had sent it.
Since the ombud’s office had to decide whether Scolari had submitted his client’s claim to Innovation on time, it sought a response from both Scolari and Innovation.
Innovation said that when Scolari sent them an email in January 2009 stating that he had attached “all outstanding claims”, Carazzo’s was not on the list of 21 claims. In February 2009, Scolari sent another email, stating that he had attached all claim forms, policy schedules and settlement letters. Once again, Carazzo’s claim was not included in the attached files.
As part of his submission to the ombud’s office, Scolari produced a printout of the “original” email sent to Innovation, reflecting an attachment bearing Carazzo’s name – as proof that he did submit the claim on time.
But Innovation disputed the authenticity of the email, denying that it had received any such email or attachment. So Bam asked Scolari to submit to her office the actual email – as an attachment. But despite repeated requests for the original email, Scolari did not produce it.
Bam found that Scolari had failed to prove that he submitted the documents on time. The code of conduct under the FAIS Act requires advisers “to employ their resources, procedures and systems” to eliminate the risk that clients will suffer financial loss “through poor administration, negligence, professional misconduct or culpable omissions”.
“The failure to retain electronic documentation favours the probability that the claim was never received by Innovation,” the ombud says. “Adding weight to this conclusion is the respondent’s failure to submit the pertinent email in the required format, in spite of more than a few requests by the ombud’s office.”
This is not the ombud’s first ruling against Scolari. In 2012, he was ordered to pay R83 500 plus interest to a Johannesburg doctor for not taking sufficient precautions to ensure that a motor vehicle was properly insured when it was driven by the doctor’s 21-year-old son.