Dispute outcome puts pressure on FSPs to treat customers fairly
The quick settlement of claim strengthens integrity of the financial services industry, the watchdog says
Financial services providers (FSPs) will need to act in your best interest, especially in light of a recent settlement where an FSP admitted guilt and settled in full after a life policy claim was rejected.
The ombud for FSPs welcomed the FSP putting their money where their mouth is regarding the heightened focus in the industry on treating customers fairly, and has urged more FSPs "to follow the example".
The Financial Advisory and Intermediary Services (Fais) ombud said that it had recently resolved a complaint that spoke directly to section 2 of the general code of conduct for authorised financial services providers and representatives.
The section deals with the required due skill and diligence an FSP needs to practise, while keeping in mind the best interests of individual customers. This relates to advice given, products offered, and the execution of their duties.
Merits of the case
The executor of the estate of a man who died on April, 13, 2018, discovered that a life policy had been replaced, and that the new insurer rejected the claim.
The executor further discovered that the application for the replacement policy had been completed on February 20 2018, and on March 14 the FSP in question instructed the client to cancel his existing policy.
However, the new policy’s inception date was delayed because of concerns surrounding the results of the deceased’s body mass index during the underwriting process. The new insurer issued an acceptance of offer letter that saw the new policy inception date moved out to May 1. As fate would have it, the gentleman died 17 days before the commencement of the new policy.
The executor was of the view that the deceased had not been advised properly regarding the cancellation of the existing policy and therefore held the FSP who had advised the deceased liable. The ombud’s office agreed.
“It is this type of collaboration between industry and an institution such as this office, in which the interests of the client are first and foremost, that will contribute further towards increasing the integrity of the financial services industry,” the ombud wrote in his ruling.
The ombud is of the view that this particular case sets a precedent for the industry to put the interests of customers first by treating them fairly in all aspects of their business.
The office believes that the FSP in this case, not named in line with the ombuds office’s policy on settlements, has shown that ethical standards can apply and, implemented speedily, result in an improvement in the integrity of the industry as a whole.
“Something that is not only part of the mandate of this office, but an aspect that we take very seriously and we encourage more FSPs to follow [this] example.”