Understanding your rights: How the Life Insurance Ombud can help you

When an insurer declines a life insurance claim and consumers feel that the outcome has been unfair, they are entitled to take up the matter with the Life Insurance Ombud at the National Financial Ombud Scheme (NFO) for free, independent assistance.

Since January this year, the Life Insurance Division has helped unlock millions of rands in claim reversals and service-related compensation. From January to date, the Life Insurance Division has recovered a total of R140.6 million in respect of all claims. This also includes declined claims that were reversed, and compensation awarded for poor service.

This is according to Denise Gabriels, Lead Ombud of the Life Insurance Division of the NFO. “Sometimes our interventions mean that claims once declined are paid in full, delivering life-changing outcomes for families". 

Gabriels explained that their mission is to resolve financial services complaints fairly, impartially, and efficiently. “We operate independently and without fear or favour, always guided by our values of excellence, integrity, passion, and vision". 

Gabriels cited a recent final ruling that ordered an insurer to pay a funeral claim of R20,000, which was initially declined on the grounds that the deceased did not qualify as a parent under the policy.

The case centred on a misrepresentation by the insurance company’s financial advisor, who had knowingly listed the deceased (described by the policyholder as her godfather and mother’s ex-partner) as her “father” during the policy application.

The insurer argued that the insured did not meet the definition of a parent in the policy contract and that the policyholder should have verified this upon receiving the documents. The case was considered in a meeting of adjudicators chaired by the lead ombud. The adjudicators ruled that the advisor’s conduct created a legitimate expectation that the cover was provided.

The panel held that insurers are bound by what is communicated at the application stage when incorrect information is given by their own representatives. Citing long-standing legal principles, the ruling stated that a party cannot benefit from its own error at the expense of another. As such, the original R20,000 claim, where the waiting period had expired, was upheld. The insurance company accepted the decision and paid the benefit in full.

Gabriels said insurers are bound by representations made by their agents during the application process. Policyholders have a reasonable expectation that the terms of a policy reflect what they were told at inception. Misrepresentation by a financial advisor can render the insurer liable, regardless of what the written contract may say, she explained.

“An insurer cannot escape liability by pointing to a policyholder’s oversight if the policy was issued based on incorrect information provided by its own representative. This ruling serves as a critical reminder to insurers of their obligations in ensuring transparent and accurate policy information and reinforces the protection of policyholders". 

But, she warned, consumers must answer questions at the application stage fully and honestly. Always request and keep a copy of your policy document and read the terms and conditions carefully. Keep your beneficiary nominations up to date, she advised.

zelda.venter@inl.co.za