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Consumer Affairs
Thursday, February 1, 2007
Cover mix up

A short term insurance broker who failed to transfer a client’s cover has been ordered by the FAIS Ombud to make good the R76 211 loss suffered in a burglary.

In finding the broker guilty of negligence and non-compliance with the FAIS Act, Charles Pillai, the Ombud for Financial Services Providers, said care and diligence required the respondent to ensure that none of its clients was left without cover when it decided to transfer its short term insurance book
The complainant, J Kearney, said she had taken out a short term insurance policy through the respondent, A R Strauss Financial Services Pty Ltd, which was administered by Dex and underwritten by Renasa.
Due to the size of the premium collected by Dex from the respondent’s business, which Renasa considered to be negligible, the respondent was advised that was no longer viable to continue doing business with Dex. Renasa accordingly gave notice on 30th September 2004 that it would cease to offer cover to all short term insurance policy holders under the respondent’s portfolio.
A R Strauss decided to transfer its insurance book to another broker, Prestasie, so policyholders would continue to enjoy cover from another short term insurer. However, Kearney’s record was never transferred to the new broker. Nor was she advised of the intended transfer to another broker, nor that she would lose cover as from 30th September 2004.
Kearney’s house was burgled on 13th November 2004. After she instituted a claim her husband was advised two days later that there was no insurance cover in place. Kearney argued that neither she nor her husband was responsible for the cancellation of the policy.
The FAIS Ombud made several attempts to elicit a response from the broker but without success. He said A R Strauss had acted negligently, and whose conduct was incongruent with the obligation to render the financial service in the interests of the client.
“Care and diligence entails that the broker follow up on all communication with all its short term insurance clients to ensure that none is left without cover.”

Copyright © Insurance Times and Investments® Vol:20.1 1st February, 2007
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