Saturday, January 22

Homeowners insurance policy sales process on a grill


The Office of Financial Counseling and Intermediation Services (Fais) Ombud is planning to take steps to change the way homeowners insurance policies are sold to the public.

Nonku Tshombe, an advocate for Fais Ombud, said how homeowners’ insurance policies are sold to the public requires attention.

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Complaints received about homeowners insurance claims related to damage caused by acts of nature, largely related to storms, specifically highlight dissatisfaction with the insurer’s decision to deny the claim on the basis of wear and tear and / or faulty workmanship, Tshombe said. in the latest Fais Ombud annual report.

Portfolio of Property Syndication Complaints

He also provided an update on the backlog of property syndication complaints, which relate to property syndication schemes promoted and marketed by companies such as Sharemax, Realcor, and Highveld Syndications, and the increase in complaints received about cryptocurrency schemes.

Read:

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Tshombe said the Fais Ombud Office committed in its 2019/2020 financial year to reduce the original number of 1,300 active property syndication complaints by a minimum of 20% annually, and by the end of March 2021 it had reduced the backlog by 20.31% to 1036 complaints.

Read: Fais Ombud aims to eradicate property syndication delay by March 2022

He said complaints about homeowners’ insurance policies are often referred by his office to the Ombudsman for Short-Term Insurance (OSTI).

But he noted that: “Despite the prevalence of these complaints both within this Office and within OSTI, there appear to be no amendments or improvements made to the way these policies are sold to the public.

“It is an issue that has been a constant complaint received by this Office over the years … that now requires attention.”

Tshombe said his office, with all the complaints received, will question the disclosures made when the financial service was provided and how the financial service was provided.

The advocate will involve the FSCA

When it is observed that no effort is being made to improve the sales process of these products, referrals will be made to the Financial Sector Conduct Authority (FSCA) for further investigation, he said.

Tshombe said that complaints considered by OSTI under homeowners insurance related to acts of nature accounted for 61% of all complaints received in terms of homeowners insurance claims in 2017, 58% in 2018 and 54% in 2019.

Of the complaints received by OSTI, the main cause of rejection of 48% of these claims in 2018 and 30% in 2019 was based on wear and tear, gradual deterioration and lack of maintenance of the building, which is the proximate cause of the damage. , He said. saying.

“It is clear from these numbers that consumers do not always know or understand the material terms and conditions contained in their policy documents, however, despite these numbers, there does not appear to be any effort made by financial service providers. [financial service providers] in the way these policies are sold to the public.

“Many of these policies are sold pursuant to a loan agreement, where the application forms are signed while the paperwork is completed with the attorneys without a financial advisor in sight.

Governance structures

“Treating Clients Fairly (TCF), which is a regulatory framework governing the way a PSF company conducts day-to-day relationships with its clients, ensures that all clients are treated fairly during all business stages of the product life cycle and the advisory process, “he said. .

Tshombe added that the provisions of the TCF framework require that customers receive clear information and be properly informed before, during and after the point of sale.

He said this is further reinforced in the sections of the General Code of Conduct for Providers and Representatives of Authorized Financial Services (General Code) where clients should be given concise details of any special terms, exclusions or instances in which coverage will not be provided to put the client in a position to make an informed decision and make an effort to mitigate any potential losses.


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