Fais Ombud recovers R39m for consumers in one year

Compensation of R39.13 million was paid to consumers due to complaints settled by the Office of the Ombud for Financial Services Providers (Fais) in its 2022/23 financial year.

A settlement was reached in 29% of the complaints referred to the office, according to the annual report released on Friday.

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The office received 10 970 new complaints during the year, but only 59% or 6 483 of all complaints received fell within the mandate of the office.

Of these 6 483 complaints, almost 76% or 4 796 of all justiciable complaints received were resolved, while 2 783 were dismissed.

Fais Ombud Advocate John Simpson said this is a testament to the efforts made and commitment to the conciliatory resolution of complaints by the office and financial services providers (FSPs) to ensure that complainants continue to be treated fairly.

Simpson said the office aims to resolve disputes in the most expedient and conciliatory way possible because this approach benefits both consumers and the FSPs.

He said determinations are regarded as a last resort option, which should only be used if all other efforts to resolve the matter have failed.

“In achieving this aim, it was not necessary for the office to issue any determinations for the financial year. Disputes were resolved by ongoing interaction and discussion with the parties,” he said.

The failure of insurers, FSPs, and financial services companies to communicate fully with their clients on the implications of their investment and insurance policy decisions is a common theme in complaints highlighted in the annual report.

Theft of Toyota Fortuner

One of the complaints highlighted related to the insurance of a Toyota Fortuner on 27 September 2021 and the theft of the vehicle on 1 April 2022.

The owner filed a claim in terms of his short-term insurance policy, but the insurer rejected the claim on the basis that the complainant did not comply with the minimum security policy requirements because the vehicle was not fitted with a tracking device at the time of the loss.

The complainant claimed he was never informed of security requirements for his vehicle or that non-compliance would result in him not enjoying cover in respect of theft and/or hijacking.

His insurer claimed it had submitted the revised policy schedule and product provider policy wording to the complainant via return e-mail on 28 September 2021, which clearly reflected the Toyota Fortuner’s security details and stated the presence of a tracking device and immobiliser.

The insurer argued that the policy schedule explicitly stipulated that the broker must be informed of any discrepancies within 31 days after the print date of the policy schedule, after which the broker would not be liable for errors or omissions.

The insurer further claimed the information contained in the policy schedule and policy wording provided to the client at the time was clear and concise but admitted the specific security requirements had not been highlighted to the complainant.

However, the insurer claimed the policy schedule and policy wording sent to the client’s e-mail address were sufficient to ensure that he was aware of the requirement for a tracking device.

The Fais Ombud informed the insurer that it had not taken reasonable and diligent steps to alert the complainant to the tracking device requirements.

Despite the insurer’s claims that the provision of a policy document/schedule was sufficient, the Fais Ombud stressed that merely providing the complainant with a policy’s wording does not comply with the General Code of Conduct for Authorised Financial Services Providers and Representatives.

“Section 7(1)(cii) provides that concise disclosures must be made of any special terms, exclusions or instances in which cover will not be provided.

“Compliance with this section of the Code is necessary to place the client in a position to make an informed decision as is required in terms of section 7(1)(a) of the Code.

“The ability to make an informed decision can only be made prior to the conclusion of the transaction and can never be made afterwards.

“Merely sending the policy wording to a layperson and expecting that person to appreciate the implications of any material terms does not constitute compliance with the Code, especially if those material terms had not even been raised by the FSP during its interactions prior to the conclusion of the transaction,” the Fais Ombud said.

The office recommended the insurer resolve the matter with the complainant, resulting in the insurer paying R644 000, which the complainant accepted.

Specified all-risks claim rejected

Another insurance-related complaint highlighted by the ombud was of a complainant who, upon arriving home, parked her vehicle and went inside.

When she went outside again, she saw the vehicle’s passenger door open and realised that her camera and camera bag left on the back seat were missing.

She submitted a claim in terms of the All Risks Benefit of her policy, as the camera was a specified item with a separate premium.

The complainant was subsequently advised the claim had been rejected due to the items not being concealed, which significantly prejudiced her because she is a freelance photographer and was unable to work.

The insurer confirmed the claim was rejected as the items were not concealed in an enclosed storage area of the vehicle and that the front and back seats of the vehicle cannot be considered as an enclosed storage area.

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The Fais Ombud stressed that the code provides that concise details be provided of any special terms, exclusions or instances in which cover will not be provided and that clients must be placed in a position to make an informed decision.

It believed this was a material disclosure required by the code.

“In the absence of proof of disclosure, the Office suggested a settlement offer be made,” it said.

“The respondent [insurer] reverted that the complainant had accepted an undisclosed offer made to her by the respondent [insurer].”

Penalised for increasing endowment premium

A third complaint involved a woman who, in 2012, applied for an endowment policy with a financial services company, which was incepted on 1 January 2013 for a period of 10 years.

During 2018, the complainant successfully applied for a partial withdrawal of R10 000 and, in 2021, also received a zero-interest loan of R10 000 on the policy.

During 2019, the complainant voluntarily requested to increase her monthly premiums on the policy, but when she sought to access 100% of the remaining funds at maturity, she was informed the policy had entered a new five-year restriction period. The funds would now only be available on 1 December 2024 because the premiums increased by more than 20%.

The complainant said she was not advised about the consequences of increasing her premium.

The Fais Ombud said the code provides that a FSP must disclose concise details of any special terms in respect of a specific product, and the complainant must be placed in a position to make an informed decision as required in terms of the code.

The FSP was requested to provide evidence in this regard but instead decided to amend the restriction end date and allow the withdrawal.

The complainant completed the disinvestment forms and received a total payment of R69 544.20 in full and final settlement.

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