Complaints by funeral policy buyers have been growing steadily over the years, with more than 40% of all complaints to the Ombudsman for Long-term Insurance relating to the growing industry of funeral insurance products.
In more than 42% of the cases, the ombud resolved complaints in favour of the complainant or, at least partially, in favour of policyholders.
The ombud’s latest annual report, published on Wednesday, shows that it adjudicated 1 482 disputes between insurance companies and their clients relating to funeral policies. In more than 50% of the cases, complaints related to the refusal to pay claims.
The ombud was called on to investigate 779 cases in which policyholders complained that their insurance company declined funeral policy claims. After considering the facts, the ombud found that claims should have been honoured in 280 instances (36% of the rejected claims).
Funeral policy complaints
The ombud, Judge Ron McLaren, says there are several reasons for the high number of complaints about funeral policies. “There are many lives covered by funeral policies. If there is a death, the claim is urgent and the complainants are understandably quick to complain if a claim is denied or not dealt with quickly – because there is somebody who needs to have a funeral.
“The fact that the percentage of cases resolved in favour of complainants in funeral complaints was 42%, as compared to the 34% for all complaints, points to this last reason,” says McLaren.
He adds that unlike other forms of life insurance, the claimants in funeral complaints may not have intermediaries that can intercede on their behalf. “The ombudsman is then the only form of recourse available.”
Most of the disputes between insurers and clients were settled quickly after the ombudsman looked at the facts and forwarded a provisional ruling to the parties according to agreed procedure.
A formal ruling is only required if either party rejects the provisional ruling.
The minefield of cheap funeral policies marketed through retail outlets such as clothing stores, cellphone companies and massive SMS campaigns to unknown telephone numbers is illustrated in a case where the ombud was called on to make a final ruling.
An insurer rejected a claim for the funeral of a child under a policy that covered the whole family when it turned out the child was the policyholder’s nephew and not one of her children. A complaint and further investigation showed that the child had stayed with the family for years as a brother to the other children. Declarations by the clients included a plea that he addressed his aunt as mother.
In this case, the office of the ombud ruled that the insurance company should pay the claim in accordance to the overriding principles of fairness.
More rulings against insurers
The ombud said in the annual report that an unusual feature of the 2019 financial year was the number of final determinations issued against insurers. There were nine such determinations – more than in any previous year, according to the report.
When a final determination against an insurer is published, the insurer is named. The insurers in question were Momentum Life, Sanlam Life, Sanlam Developing Markets (in two cases), Clientèle [Life] Assurance, Safrican Insurance, Nedgroup Life, Centriq Life and BrightRock Life.
In the balance of cases resolved wholly or partially in favour of complainants, there were 71 provisional determinations that were accepted by insurers and 1 133 cases where insurers settled the cases without the need for a determination.
Life cover disputes rise
Of interest is that a statistical summary of cases finalised during the year shows that cases relating to life policies have increased sharply over the previous year.
Instances where claims against a life policy were declined increased by a massive 26% to 438 cases, due either to policy terms and conditions not being adhered to or non-disclosure.
Policyholders got relief or partial relief in around 25% of the cases after involving the ombud.
Dissatisfaction with policy performance, maturity values or surrender values elicited 20% more complaints than in the previous year, but adjustments were only considered in 10% of the complaints.
Nevertheless, complaints against the life insurance industry increased from 1 183 in 2018 to 1 429 in 2019.
The ombud received 11 915 written requests for assistance in 2019, which included 6 107 complaints that were investigated. Some 3 558 cases were finalised and just over 34% of these were resolved wholly or partially in favour of the complainants.
More than R200 million was recovered for complainants in the form of lump sums.
This figure does not reflect the value of all benefits awarded in favour of complainants such as income disability benefits, annuity payments and reinstatement of policies. In addition, nearly R875 000 was awarded to complainants as compensation for poor service by insurers in 190 complaints.
The report contains a list of companies that clients complained about, as well as the percentage of cases where the ombud ruled for or against policyholders.
It makes for interesting reading, even with the report cautioning readers that the statistics on their own might be misleading – for instance, a low number of complaints could mean that the insurer has a good complaints department rather than fewer unhappy clients.
The percentages must also be considered closely. For instance, if the ombud ruled against an insurer’s handling of a single complaint received, it obviously does not mean the insurer is always in the wrong.
That said, a few numbers stand out:
- The ombud ruled against 3Sixty Life in 74% of the 121 complaints finalised against the company, which according to its website mainly sells funeral policies. It received 156 complaints from clients last year.
- More than 170 complaints were lodged against Safrican Life Insurance of which 127 were finalised and the company was found at fault in 90 instances.
- The most complaints to the ombud were filed against Old Mutual, also the largest life office in SA. Of the 885 complaints, 629 were finalised with some type of relief offered to 29 of the cases.
- Hollard Life Insurance customers applied for help from the ombud in 511 instances of which 402 complaints were finalised. Nearly 44% were settled in favour of the policyholders.
The ombud says complaints are only investigated by its office if the client and its insurer cannot come to agreement, which means that even lower percentages of rulings in favour of complainants are a bad reflection of the industry.
In an electronic press conference, McLaren and deputy ombud Jennifer Preiss said the amalgamation of the Ombudsman for Long-term Insurance and the Ombudsman for Short-term Insurance is still proceeding, with one body aimed at delivering a better service to the insurance industry (and, presumably, the public).
It will, among other measures, reduce duplication and streamline the complaints process.
Listen to Nompu Siziba’s interview with Marius Botha from Stangen Life: