The insurance industry must become more yielding, and where necessary, supplement policy provisions with equity by acting in a more reasonable and fair manner that also reflects ubuntu, which carries within it humaneness, said Judge Ron McLaren, Ombudsman for Long-Term Insurance (OLTI).
He was making a determination against Sanlam Developing Markets (SDM), after they refused to pay claims under three funeral policies because the deceased had been misrepresented as the “son” of the complainant in the policy.
He should also have said in plain English that insurance companies should sometimes take into account the spirit of the law and not adhere to the letter of the law.
The judge said ubuntu was “enshrined in our law and that the Consumer Protection Act (CPA) also took into account the disparity in bargaining power in most insurance contracts as well as the technical nature of insurance agreements”.
The complainant took out a funeral policy in 2013, 2015 and in 2016, covering her family which included the deceased as a life insured and paid premiums for him. She had cared for him from 2009 until February 1, last year, when he was stabbed during a robbery.
She said she had helped the “son’s” family when they were experiencing hard times in a rural settlement. In December 2009, the “son” began living at her house with her own children and he refused to go back to his family.
The woman said she regarded him as part of her family, even though there was no legal adoption. There was mutual affection between them.
She enrolled him at high school and arranged for his customary circumcision.
She treated him like she did her other children because “according to our tradition, an orphan is treated the same way as the kids he lives with”.
“He called me ‘aunt’ and later called me ‘mum’,” the woman said.
An aunt confirmed that the woman had become a parent to the boy and provided food, clothing, education and medical attention.
“To prove that she did not have any regrets for caring for him as her son, she paid all the funeral expenses in remembrance of all the time they spent together,” the aunt said.
The sister and brother as well as the village headman confirmed that the woman had taken care of the sibling.
However, SDM rejected the claims because the “mother” described him as a family member when there was no blood relationship.
SDM refunded premiums she had paid for the “son”.
The OLTI’s office suggested to SDM that they should consider equity/fairness and take into consideration the relationship between the “mother” and the “son”.
The insurer was not prepared to make a concession, as there had been a material misrepresentation and they would not have accepted the risk had they known of the true relationship.
There was a unanimous decision at an adjudicator’s meeting that the insurer should in fairness pay the claims, less the amounts already paid.
SDM said that taking everything in to consideration, the claim should not be paid, “no matter how much one’s heart goes out to the bereaved policyholder”.
“The policy spells out clearly, in plain language, which persons may be covered – in particular also who can be covered as a child of the policyholder. The complainant included the deceased as her child. This was an intentional misrepresentation. She knew he was not her child. She said the deceased at first called her ‘aunt’. We endorse your equity but equity is not an exact concept. Fairness remains an abstract value,” SDM said, and added, “it would be unfair to expect the pool of policyholders to absorb the expense of the claim”.
In his final determination, Judge McLaren disagreed with SDM’s assertion that it was an intentional misrepresentation.
“There was no fraudulent intent on the part of the complainant when she described the relationship as she did. She described the de facto relationship. There is no evidence that this was a situation where the complainant had no connection with the deceased or where there was no insurable interest and the complainant was intent on financial rewards for herself on the deceased’s death.”
The woman said the sales agent did not point out that there had to be a blood relationship between her and the deceased.
Judge McLaren said “fairness” informed the decision that SDM should pay the claim in line with the “treating customers fairly” approach included in the policyholder protection rules.
Fairness is one of the fundamental principles that the International Network of Financial Services Ombudsman Schemes recommends.
“It is, therefore, clear that equity/fairness is part of the financial services landscape and has been part of our jurisdiction for more than 20 years.”
SDM was ordered to pay the claims (less premiums refunded) plus interest.
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