The case of a Cape Town man highlights the importance of knowing exactly what you are insured for when you sign an insurance policy.
Robert Collop lodged a complaint against Old Mutual because, he says, the insurance giant “treated him unfairly” over a Greenlight policy for an “accidental disability/death benefit” that he took out through a broker in October 2002.
Over the years, Collop paid his premiums and was sent annual statements, but it was only in 2015 that he realised that the “death benefit” wasn’t full life cover - the policy covered only accidental death or disability.
Collop complained to Old Mutual, but he says the company didn’t respond to his email.
In April this year, Alana Reyneke, the company’s assistant internal arbitrator, apologised to Collop for the delay in responding to the matter and included an explanation from Old Mutual’s claims assessor, John Horack, who said the policy had been sold by an independent broker. “The broker, a licensed financial services provider, acted as the agent, and was solely responsible and accountable for the advice he gave,” Horack said.
Collop argued that, when a consumer is approached by someone wanting to sell an Old Mutual policy, it is assumed that he is representing the company. Collop asked Old Mutual for a letter stating the broker did not work for them. “Our records show the broker has been inactive since 2005,” Horack said.
Unhappy with Old Mutual’s response, Collop approached the Ombudsman for Long Term Insurance (Olti). Abigail Machine, an adjudicator in the ombud’s office, ruled in favour of Old Mutual. Machine also asked Old Mutual if it would offer Collop a life policy, considering the premiums he had been paying with limited or no underwriting.
Machine told Collop: “The insurer was not a party to the discussions between you and the broker when the policy was taken out. We have asked the insurer to consider giving you life cover at the same rate as you are paying the current policy.
“However, Old Mutual said it will not be possible without you undergoing its underwriting processes to determine whether you qualify for ordinary life cover. It is then your choice to opt out of your current policy or to still retain it.
“No premiums will be due to you, as the insurer was at risk for all the time that the policy was in place, and as long as the policy remains in place. Old Mutual offered you R5000 as compensation for poor service, which to me seems reasonable under the circumstances.”
Old Mutual later upped the offer to R7500, which Collop accepted, as well as the Olti’s ruling.
“I have accepted the ruling, but feel I have been unfairly treated in that the compensation offered is a fraction of the premiums I paid since I logged my complaint.
“If they had responded in 2015, I would have cancelled my policy and cut my losses. But as a direct result of their bad service I am out of pocket by a substantial sum I would be happy if they did the honourable thing and paid back my premiums since 2015 when I logged the complaint. It does not make sense to me to offer R7500 for bad service when I am out of pocket by about R30000.”
Collop told Personal Finance his wife took out the policy, which he signed. He admitted to fully reading through the small print only this year.
“The heading is misleading, as I was led to believe that we had life cover because of the term ‘death benefit’,” he said.
He said the policy did not even cover death or disability as a result of riots. (This insurance, underwritten by the South African Special Risk Insurance Association, provides cover against public disorder, strikes, riots and terrorism.)
Carmen Williams, complaints manager at Old Mutual, confirmed that Collop’s Greenlight policy
started in October 2002 based on advice from an independent broker.
“We acknowledge that you
should have received better service from Old Mutual when you contacted us. According to our records one
of our advisers did respond to
your complaint, on August 7, 2015,” said Williams.
“The matter was referred to a broker manager, who should have followed up. We are very sorry that this apparently did not happen and we continue to look for ways to improve our service process.
“We have paid you R7 500 (we upped our earlier offer of R5 000) in compensation for the poor service and hope this makes up for some of the stress and inconvenience you may have experienced.”
INSURANCE POLICY CHECKLIST
The Ombudsman for Long Term Insurance (Olti) has issued a fairness checklist that applies to policies sold after July 1, 2001. It says:
* The policyholder is entitled to details of the intermediary and their relationship with the insurer.
* Insurers must mandate intermediaries for the products they sell.
* Policyholders must be given details of the transaction with reference to expenses, assumptions, values, benefits, premiums, loading, guarantees, and exclusions; information about the cooling-off period; the implications of replacing one policy with another; notification from the insurer that a policy has been cancelled; and a written explanation for repudiation or non-payment of claims.
The self-help guide on the Olti website (www.ombud.co.za) states, among other things, that you have a 30-day grace period during which a policy or an amendment to a policy can be cancelled.
The guide advises that you always complete a proposal form for a policy yourself. Only in this way will you fully understand the nature of the information required.
Always read any document before you sign it, to ensure that the document conforms to your expectations and you understand the contract.