PERSONAL FINANCE
Broker who failed to act on instructions has to cough up R256,800
A client who recently had a claim declined due to non-payment of premiums, was compensated by his broker after the Financial Advisory and Intermediary Services ombud intervened.
In this case, the client’s car was involved in an accident on 23 June 2022. The claim was registered on 27 June, and the broker said it was then notified “for the first time” by the insurer that two payments had been missed, resulting in the claim being declined.
It turned out that the client had switched bank accounts and on 19 May he sent the broker a WhatsApp message asking the broker to update his bank details with the insurer. There were other instructions in the same message, which the broker acted on. However, the broker said he “did not see” the message about the change of banking details.
The result was that two premiums were declined on 1 June and 1 July.
When you miss an insurance premium payment you have a grace period of 15 days to pay the outstanding amount. In its ruling the ombud noted that this grace period only applies from the second month of the policy. “However, the way in which you make up the outstanding premium differs between insurers, so always contact the specific insurer to confirm how payment is to be made,” the ombud said.
The broker tried to argue that he had not received notification of missed payments from the insurer, so the insurer was liable for the miscommunication. “The very nature of the (broker’s) work is that he is entrusted with the financial well-being of (clients). It was confirmed that all the other changes communicated to the (broker) via WhatsApp had been actioned, which confirms that the instruction had been received but not actioned. In addition, the client mandates a financial services provider and/or its representatives to carry out specific instructions. In this agreement, it is required of the (broker or financial services provider) to exercise reasonably the required due care and skill,” the ombud said.
The ombud found that the failure to pay the claim was the fault of the broker and due to his “shortcomings in the financial service rendered” he was ordered to resolve the issue with the client. The broker agreed to settle the loss of R256,800.
“While this case study resulted in a positive outcome for the complainant, there are many complaints where we are unable to assist due to the complainant having failed to make payment as required. Even though the Policyholder Protection Rule provides that a client must be notified of the missed premiums, you as the client must make a habit of ensuring that your premium payments are maintained and up to date to enjoy the benefits provided by the policy,” the ombud said.
The ombud also noted that you can submit a valid claim during the grace period (after one missed payment), but some policies might still require that the premium is received within the grace period for the claim to be valid. Your insurer can also choose to reduce the amount of a valid claim submitted during the grace period by the amount of your unpaid premium. DM
In my opinion this is a harsh ruling. 1. A mere whattsapp instructing the broker to change the client’s debit order details is normally insufficient for the broker to do so of his own bat. Normally there are formalities that need to be completed by the client. 2. It is not difficult to miss something in a whattsapp message. Surely an email or phone call would be the way to go. 3. The company is relying on a genuine mistake to avoid a claim. All they had to do was liase with the client to check if there would have been funds in the new account to cover the premiums had the change been made as intended. The company appears to have acted in bad faith by repudiating.
Agreed! Having dealt with a great many WhatsApp messages from customers in my time, I can confidently say that such messages are not always structured in the most readable manner, and it is easy to miss a specific detail. Even more so when multiple matters are combined into a single message.
Besides that, I also find the broker’s defence reasonable — why was an insurance policy suspended with no notification to either the client or his registered representative? Surely that, too, qualifies as “shortcomings in the financial service rendered”!
Bad faith indeed. The broker should take the ombud’s ruling on review.
1) Normally both the client and the Broker are notified of non-payments via email by the insurance company.
2) Should the client should have noticed that the premiums was not being deducted? And thus sent a follow-up instruction to the broker? That is why the grace period exits.
3) The statement that the insurance company acted in “bad faith” is not cool, as the Ombud sided with the Insurance company as a valid rejections.
4) Public reputation for an insurance company is super important. And they strive to repudiate as few claims as possible, and the ones that do get repudiated are upheld by the Ombudsman as valid rejections.
An indicator of a bad insurance company is how many resersals the Ombudsman does per thousand claims.
When all is said and done. People are chancers and insurance is a grudge payment nobody wants but every body needs.