If a life assurer, because of inefficiency or poor service, causes you financial loss, major inconvenience or distress when processing your claim, the Ombudsman for Long-term Insurance can order the assurer to compensate you, irrespective of the merits of the claim itself.

This was highlighted in the latest edition of the ombudsman’s Ombuzz newsletter, which details two cases in which complainants were awarded compensation for being severely inconvenienced by their life companies.

In terms of the ombudsman’s rules, his office can make a determination to “award compensation, irrespective of a determination made, for material inconvenience or distress or for financial loss suffered by a complainant as a result of error, omission or maladministration (including manifestly unacceptable or incompetent service) on the part of the [life company]; provided that the amount of such compensation shall not exceed the sum of R30 000 …”

Case one: Benign tumour

The complainant, Mrs A, had a benign tumour of the pituitary gland that was surgically removed. Her dread disease policy specifically excluded cover for “benign tumours of the pituitary gland”, so her claim was rejected. But this was not before Mrs A’s life company had given her the runaround.

Mrs A wrote in her complaint: “[The assurer] made me spend money and time in finding all the secondary documentation that they requested to assess the validity of my claim … I should have used the time and money travelling across towns towards my healing and medical bills. I have paid money to get the doctors to complete [the assurer’s] forms and release the information requested by the assessors. After all that trouble, [the assurer] informs me that my illness is not covered by their policy. I doubt if I would be complaining if they informed me from the start that they don’t cover benign brain tumours of the pituitary gland.”

In its defence, the life assurer said it “reserves the right to investigate the validity of all early claims in order to ensure that only valid claims are paid”.

The office of the long-term insurance ombudsman, Judge Ron McLaren, suggested to the assurer that “there was no chance that this claim would be paid, so why was it necessary to look at [Mrs A’s] medical history at all?” The office also told the assurer that the complainant had “incurred expenses by having to go and collect the medical reports”, and that she had been inconvenienced.

After some haggling between the assurer and complainant on the compensation amount, the assurer offered R6 500 “as a final settlement”. The ombudsman’s office advised Mrs A that it considered R6 500 fair, and she reluctantly accepted the offer.

Case two: Lapsed policy

On being diagnosed with cancer, Mrs B claimed on her dread disease policy, which, unbeknown to her, had lapsed. After phoning her assurer a number of times, she was sent a claim form, with a request to submit the hospital account. The complainant sent the completed form to the assurer, but she received no acknowledgement thereof, nor any response to her enquiries.

The insurer then wrote to Mrs B, asking for a “copy of the histology (laboratory) report confirming the diagnosis of cancer ... in order for us to proceed with your claim”. Mrs B had to make two trips, by taxi, to the hospital. The transport costs were R200, and the doctor charged her R150 for the report.

In the ensuing months, Mrs B made repeated enquiries about her claim, with no success. Eventually, she was told her policy had lapsed, but that the matter would be taken up with the assurer’s “board”. Mrs B was promised that a form would be sent to her, which she would have to sign, and it was conveyed to her that she would be paid out.

Eventually, almost a year after the initial submission of the claim, the life assurer repudiated it. In the meantime, on the strength of the assurer’s promise and in the belief that she would be paid out, Mrs B had taken out a loan at a punitive interest rate.

In complaining to the ombudsman, Mrs B questioned why she had not been told in the first place that the policy had lapsed.

In its response, the assurer apologised to the complainant and conceded that “the claim should have been rejected from the outset”. The assurer said it would pay Mrs B’s cost for obtaining the medical report, but declined to pay her travelling expenses.

The ombudsman says it is clear that the assurer sent the “complainant on a stressful, wasteful exercise in futility – a veritable wild goose chase”, and his ruling bemoans “the material inconvenience and distress that the complainant suffered as a result of the assurer’s manifestly unacceptable and incompetent service”.

A provisional ruling was made, awarding Mrs B compensation of R5 200, which included her travelling expenses. She accepted the ruling and wrote a letter of thanks to the office. The assurer paid without demur, according to Ombuzz.

* If you have a complaint related to a long-term insurance policy, contact the office of the ombudsman, Judge Ron McLaren, on 0860 662 837, or email [email protected]