A broker sits at his desk at the stock exchange in Frankfurt, Germany. Picture: AFP PHOTO/DANIEL ROLAND
A broker sits at his desk at the stock exchange in Frankfurt, Germany. Picture: AFP PHOTO/DANIEL ROLAND

Did you know that you may be able to get compensation for a repudiated insurance claim if your broker failed to properly explain the material conditions of your policy to you?

This may also be the case if an adviser recommends you replace one life policy with another and you later to find out you were switched to a policy with lesser benefits.

An analysis of complaints to SA's financial advice ombudsman produces valuable lessons — and warnings for those tempted to dabble in cryptocurrencies or trading in foreign currencies.

There is also comfort for bank account users who fall victim to fraudsters in the latest report on complaints to the Ombudsman for Financial Services Pro-viders.

The report notes that 32% of complaints to the ombudsman last year were about insurance policies.

In many cases in which policyholders' claims were repudiated the ombudsman found consumers were victims of bad advice when policies were sold without the material conditions being highlighted.

His findings led to many financial service providers or brokers settling the claims.

In one complaint a homeowner took out insurance with his bond in 1997. Years later he installed an outdoor pizza oven that caused a fire that burnt the family home down in 2014.

The insurer rejected the claim for almost R1.5m because the pizza oven did not conform to building practices, being too close to wooden rafters.

A condition of the policy on the home was that the building comply with regulations.

The bank that sold the policy said it was sold without advice, but Naresh Tulsie, the ombudsman until November this year, says in his report that financial institutions can't just send you policy documents and claim they have complied with their duties under the Financial Advice and Intermediary Services (FAIS) Act. A code under the act requires them to make disclosures about material conditions in the policy.

The unnamed company involved conceded and paid a settlement of R800,000 — the maximum the ombudsman can award.

In another case, a business owner insured his business and personal assets including, he thought, his caravan and contents. Later another broker offered to review his cover and moved it to another insurer.

When his caravan was broken into, the man found his claim was rejected because the caravan contents were not covered.

The broker claimed it performed a simple transfer of the cover and the first broker should be blamed for not including the caravan contents.

But Tulsie says the broker should have identified the man's insurance needs and analysed the appropriateness of the policy it recommended. This resulted in the broker settling the R25,000 claim.

In a third settlement recorded in the ombudsman's annual report, another homeowner's claim was repudiated because she had not occupied her house for 30 days before being burgled. She claimed she wasn't aware the house had to be occupied all the time.

Tulsie asked the broker to prove it had made the woman aware of this material condition. The insurer was unable to do so and settled the claim for R165,000.

Soured forex, crypto-currencies deals are trending

Promises of quick and easy money

Consumers are increasingly being lured on social media to invest in forex platforms or cryptocurrencies.

More often than not, the forex platforms turn out to be scams, says Naresh Tulsie, outgoing ombudsman for financial services providers.

Tulsie says there has also been an increase in complaints about "copycat" forex traders - individuals who are not registered as financial services providers but offer you the "opportunity" to copy their trades for a fee.

These operators don't care whether forex is suitable to your needs, and take no responsibility for any of the "losses that invariably occur without any substantial explanation or justification", the ombudsman says.

Tulsie also warns against those who try to circumvent the law by offering forex training software with the promise of turning you into a forex trader. After you've signed up, the same entity is likely to offer you a broker service with no liability in the event of losses.

Crypto complaints

An increasing number of complaints about cryptocurrency investments, especially in bitcoin, show that these are being marketed as mainstream investments, but investors are not warned about the lack of regulation or the risks involved, and at times are lured with supposed "guarantees" on their investments in these volatile currencies, the ombudsman says.

"Investigations into a few matters are at an advanced stage, and this office is looking to issue its first determination on this type of investment early in the new year," the annual report says.

Tulsie says that if an adviser - or even your lay-person friend - advises you to invest in a cryptocurrency that turns out to be an unsuitable investment or a scam, you could potentially have recourse through the ombudsman's office.

He says "it would depend on the actual circumstances and facts of each individual matter" but points out that under the Financial Sector Regulation Act, the provision of financial advice, whether by a licensed entity or person or not, falls within the ambit of the ombudsman's office.

Irlon Terblanche, CEO of Blockchain Capital, says SA is trying to develop regulations for crypto-asset activities. However, until such time as regulations are in place, you are vulnerable.

Bad policy replacements

Bad advice on life assurance accounts for more than 28% of complaints the ombudsman dealt with last year.

In his report, Tulsie identifies an increase in complaints about existing policies that are replaced with ones with lesser benefits.

The FAIS Act's code of conduct says your adviser has to point out to you all the implications and consequences of replacing one policy with another.

Tulsie says the information brokers provide is often not enough to enable you to make an informed decision.

When an adviser suggests you switch one policy for another, they should not only give you a detailed comparison of the policies, but should also make sure you understand the policy differences.

Masthead says you should also be informed what impact your age and health will have on the premiums you will pay in future — could the policy become unaffordable in a few years' time?

Robo advice

Another steadily growing cause of complaints that Tulsie identifies in his report is that arising when consumers buy financial products on online platforms.

Tulsie says that regardless of whether the online platform is a robo-adviser offering to advise you on, for example, appropriate investments, or whether it just gives you an opportunity to buy a product online, the provider must comply with the FAIS Act.

This means the company must make certain disclosures to you so that you can make an informed choice.

When a policyholder complained to the ombudsman about a claim on a medical insurance policy for her husband's gastroscopy being rejected, the insurer responded that the condition was excluded.

The insurer claimed the policy was sold online without advice, but Tulsie said the exclusion should nevertheless have been pointed out to the policyholder. The insurer settled the almost R8,000 claim.

Banking complaints

Banks take the view that when there's fraud on your account without a breach of the bank's systems, it is as a result of your personal details being compromised and they aren't liable for any losses incurred.

This is being challenged in court and the Financial Sector Conduct Authority has issued a draft conduct standard that includes provisions to ensure you are treated fairly when you are the victim of a cyberattack.

In the meantime, consumers who have complained about their banks' failure to help them are getting some relief.

The ombudsman's office has approached the banks on a number of matters, asking that in the interests of treating customers fairly, they use “their significant resources” to at least help clients in any further investigations so that they receive justice.