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Financial Services
Thursday, February 1, 2007
Avoid shortcuts

It happens from time to time that a claim is repudiated by the product supplier, whether it is long-term insurance, short-term insurance or health care benefits. The aggrieved party (or family of the deceased) then blames the intermediary. He is accused of failing to complete an application correctly or omitting material information. This usually results in complaints being directed to the FAIS Ombud and in some cases the intermediary may find himself at the wrong end of a civil suit for damages.

In the life insurance industry, for example, repudiation of a claim mostly relates to an undisclosed prior existing medical condition. The intermediary may now believe that it is safer to have the client complete the application form himself, thereby absolving him of all possible adverse consequences of a claim being repudiated. But it is not that simple, says Joe Kotzé, National Manager: Compliance at the Insurance Brokers’ Council.
“Having the client fill out the proposal form may go a long way, from a contractual point of view, but would mean little in absolving the broker from his duties in terms of the General Code of Conduct for Authorised Financial Services Providers and Intermediaries.
In terms of section 2:
A provider must at all times render financial services honestly, fairly, with due skill, care and diligence, and in the interests of clients and the integrity of the financial services industry.
“This section underpins the objective of the FAIS Act and the General Code of Conduct and speaks for itself,” Mr Kotzé points out. “Ignoring this basic principle may put the fit and proper status of the intermediary into jeopardy. The FSB may at any stage revisit the information provided by him when he applied for a license and measure that against his conduct in specific cases or in general.”
In section 7(1)(d):
A provider must fully inform a client in regard to the completion or submission of any transaction requirement.
To paraphrase, such requirement includes all information, which must be accurately and properly disclosed; the client must be satisfied with the accuracy and completeness of the details, and understand the consequences of misrepresentation or non-disclosure.
Of course, there is an obligation on the client to be responsible for his conduct regarding his financial matters. He needs to read documents carefully, verify facts and information and also maintain a sense of integrity. This principle has been highlighted in many court cases. The intermediary is not the keeper of the client in all respects.
In section 7(2):
No provider may in the course of rendering a financial service request a client to sign a document unless all details required have been inserted thereon by the client or on behalf of the client.
Comments Mr Kotzé, “It is a cardinal sin to have the client sign blank or incomplete documents. In many instances, the intermediary may have all information to complete an application at his office, but all the above requirements must be adhered to before the client signs the document.”
In section 21:
No provider may request or induce in any manner a client to waive any right or benefit conferred on the client by or in terms of the Code, or recognize, accept or act on any such waiver, and any such waiver is null and void.
“Even if the client is your best buddy, he cannot give you permission to complete an application on his behalf without you following the above to the letter,” he adds.
“There are various other references in the General Code of Conduct alluding to the duties of keeping the client informed about risks involved in the transaction process.
“The FAIS Ombud has on several occasions in his determinations referred to these duties of the intermediary. Don’t believe there are shortcuts in the compliance process,” warns Mr Kotzé.
 

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