Momentum’s Ganas saga prompts ombudsman to request a law review
The long-term insurance watchdog wants a policy to be retroactively restructured in the event of a non-fraudulent misrepresentation
The ombudsman for long-term insurance has called on legislators to reconsider current non-disclosure laws.
Under the current legislation, the ombudsman’s office has to apply the law to the facts in cases brought to it for resolution, even if the outcome is considered unfair in the eyes of the public.
This is why the ombudsman upheld Momentum’s 2018 decision in the high-profile Ganas case.
Nathan Ganas died when criminals shot him in front of his family in a botched hijacking. Momentum initially turned down the R2.4-million claim on Ganas’s life policy due to his failure to disclose a pre-existing medical condition when he applied for cover.
“We upheld Momentum’s right to repudiate the policy and decline the death claim,” judge Ron McLaren says in his latest annual report.
He said in its final determination, the ombudsman applied the law to the facts as it established them.
The causal connection is between the non-disclosure and the conclusion of the contract and not between the non-disclosure and the claim event, for instance death, he explained.
Following a public outcry that Ganas’s death from gunshots was in no way related to what Momentum said he failed to disclose — high blood sugar levels — the insurer created a new benefit for violent deaths and paid the claim.
Jennifer Preiss, the deputy ombudsman for long-term insurance, says rules about the failure to disclose material information have been in the law for a long time and are currently contained in the Policyholder Protection Rules under the Long-Term Insurance Act.
As a policyholder taking out life cover, you are legally obliged to disclose all the facts that are considered material so the life assurer can make an informed decision on whether to grant you cover. And the test for measuring what is material is what a reasonable person would have disclosed, she said.
The ombudsman is strongly of the view that in the event of a non-fraudulent misrepresentation, the policy should be “reconstructed” to reflect what it would have been if the policyholder had disclosed all that he or she should have. This is referred to as the Didcott principle, named after the late judge John Didcott.
This may mean new premium loadings and exclusions could apply that will impact on the policy and any potential claim payout.
The ombudsman would like the legislature to relook at the legislation and at the very least incorporate the Didcott principle, said Preiss.
According to the annual report, the ombudsman for long-term insurance received a record 11,768 written requests for assistance from consumers in disputes with their insurers in 2018. This was 1,000 more than the previous year.
Just under 6,000 of the 11,768 complaints fell within the jurisdiction of the ombudman’s office, 10% more than the previous year.
A total of 3,951 of the roughly 6,000 complaints were referred to the relevant insurers who settled 1,132 cases — just under 29% of them — directly with the policyholders.
Of the more than 3,360 cases considered by the ombudsman, 31.5% were resolved partially or wholly in favour of policyholders, a slight increase on the 29% found in favour of consumers in 2017.
If the cases resolved by the ombudsman are taken together with the cases resolved directly by insurers, it means that consumers won their battles in 40% of these complaints in 2018. This is compared with an average 37% of cases settled in favour of consumers in the last few years.
The two top complaints were claims denied by insurers, followed by poor service.
Collectively R185.8m was recovered for complainants in the form of lump sums. The figure excludes the value of other benefits such as recurring income disability benefits, annuities, the reinstatement of policies and so on, the report states.
The ombudsman managed to finalise 91% of complaints within six months, an improvement on the 85% finalised in this time frame the previous year.