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Life Assurance
Thursday, May 1, 2014 - 09:27
Complaints persist

According to its newly released annual report, the number of complaints lodged with the Ombudsman for Long-term Insurance continued to grow, reaching a record 10 028 last year, an increase of 4.5% over 2012.

The consistent increase in complaints received over the past few years has been driven by the significant growth in the number of policies sold by the insurance industry as well as public awareness of Ombudsman offices in general.
During 2013 the office finalised 4 496 full cases, with 77% of these finalised within six months. The office recovered R103,8 million (in lump sums) for complainants over the past year with 33% of cases resolved wholly or partially in favour of complainants. In addition, compensation of R343 741 was granted to consumers for poor service.
The Ombudsman for Long-term Insurance deals with complaints concerning life, disability, health and funeral cover. The report notes that complaints are getting increasingly complex and consumers are becoming more demanding and persistent in pursuing their grievances.
“Ombudsman schemes used to be on the periphery of financial services, but they are now viewed as integral to financial services,” says Long-term Insurance Ombudsman, Judge Ron McLaren, who took over the position of Ombudsman on 1st June 2013, following the retirement of former Ombudsman, Judge Brian Galgut.
Most of the complaints received by the office during 2013 related to poor communication and claims, which insurers had declined, although there was also dissatisfaction around values and lapsing of long-term insurance policies.
Complaints about life cover have fallen from 35% of total cases in 2011 to 31% in 2013.While funeral policies made up 37% of the total complaints in 2011, this also fell - to 31,5% in 2013. But complaints in the healthcare category relating mostly to hospital cash plans increased from 9% in 2011 to 20% last year. This trend is driven by excessive claims under these policies, which has been a concern for the office over the past two years.
Judge McLaren says many insurers have improved their resolution of complaints relating to funeral cover, but it remains worrying that there are ‘rogue’ funeral administrators who collect premiums on behalf of insurance companies, but do not pay over the premiums to the insurer. “This inevitably leads to a cancellation of the policy by the insurer and non-payment of any benefit to the life insured’s family.”
The Ombudsman says the Twin Peaks Model of Financial Regulation to be implemented by the National Treasury will seek to strengthen the ombudsman system and require all financial institutions to be members of an ombudsman scheme through changes to the Financial Services Ombud Schemes (FSOS) Act.
Judge Leona Theron was elected as Chairperson of the Council of the Ombudsman for Long-term Insurance. She was appointed as a judge of the Supreme Court of Appeal in 2010 and is currently the youngest member on that Bench. She also sits on a number of boards and has received numerous awards for her contribution to the development of justice in South Africa.
In a move towards greater transparency, the Ombudsman has published complaints information about each insurer for the second time on www.ombud.co.za (and choose the menu: publications>complaints data). This includes details of the number of complaints received and finalised and whether they were in the complainant’s or the insurer’s favour.


“The publication will also encourage insurers to benchmark their standards of complaints handling against other insurers and learn from other companies who appear to be better at complaints handling,” adds Judge McLaren.
But he points out that the complaints data should be used by intermediaries, consumers and others in conjunction with other measures, such as the size of the insurer; number of policies in issue; claims ratio; its efficiency generally; and its products to give a full picture of an insurer’s performance.
Judge McLaren explains that there is growing use of social media to resolve complaints. “People are using social media to voice their dissatisfaction with financial institutions and it is increasingly being seen as an alternative to the more traditional forms of consumer recourse,” he adds. “Financial institutions tend to react swiftly to social media complaints because of the threat of negative publicity, which in turn encourages the use of this as a medium for complaint resolution.”
“Ultimately, what complainants want is ‘fair’ resolutions from financial institutions – not just a reliance on legal or contractual grounds.”
 

Copyright © Insurance Times and Investments® Vol:27.5 1st May, 2014
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