Ombud backs widow against big insurer, writes Isaac Moledi

Financial Advisory and Intermediary Services Ombud (FAIS Ombud) Charles Pillai has started the new year with guns blazing.

Financial Advisory and Intermediary Services Ombud (FAIS Ombud) Charles Pillai has started the new year with guns blazing.

He has come down hard on a home loans company, South African Home Loans (SAHL), for providing "shoddy service, minimal advice" and overcharging commission.

Saroja Naidoo, an unemployed KwaZulu-Natal widow, had complained to the Ombud after SAHL rejected her claim in terms of a bond protection plan her husband took with South African Home Loans Life, an insurance wing of SAHL.

The policy covers outstanding liability in the event of death. Naidoo claimed against the policy after her husband, Subramoney, died in October 2005, six months after the inception of the policy.

Her husband had borrowed R100000 from SAHL but the company refused to cancel the debt after he died.

The Naidoo's bought the policy through telephonic direct marketing.

The term of the policy is 16 years, which is equal to the mortgage agreement with SAHL.

The company was found to have made disclosures to Naidoo that were "confusing and misleading".

In his judgment, Pillai ordered SAHL to refund Naidoo all bond payments made after her husband's death.

Pillai found that though the company had, in a "14-second telephonic conversation", explained an exclusion clause pertaining to pre-existing medical conditions to Naidoo, it had not done so to her husband before he died.

Naidoo's husband was a heart patient.

Clause 13 of the policy deals with exclusions.

It is this clause the insurer relied on in rejecting the claim.

It states that if a life assured "dies within 24 months of commencement of the policy or becomes disabled at any time during the duration of the policy, due to any condition, physical defect, illness, bodily injury or disability which the insured was aware of and/or received medical advice or treatment for prior to the commencement date or date of any reinstatement, no claim will be paid and all premiums paid will be forfeited".

SAHL rejected Naidoo's claim because it said her husband died as a result of a pre-existing heart condition.

In her letter of complaint to the Ombud, Naidoo alleged that she was not clearly informed of the pre-existing conditions clause in the policy.

In her letter to SAHL she said the pre-existing conditions clause was not discussed with her or her husband.

She further said she did not receive the policy document and that had she and her husband been aware of the pre-existing conditions clause they would have queried it and would not have taken it.

In response to the Ombud's queries, SAHL argued that during the telephone call when the policy was sold to Naidoo the complainant was informed about the policy's conditions.

SAHL also said Naidoo and her brother met the managing director of SAHL Life, who explained to them the policy's conditions.

Pillai said in his ruling: "It is an undisputed fact that the respondent spoke to only one of the life assured, namely the complainant.

"No conversation was ever held with the deceased.

"It is common cause that both complainant and her husband were joint life assured.

"Nowhere on the undisputed facts is there any reference to any disclosures or warnings or discussions regarding the pre-existing conditions clause, or any other terms and conditions for that matter, in relation to the deceased.

"Logic would demand that any discussion relating to the pre-existing conditions of the deceased ought to have been discussed with the deceased himself and not with his spouse only," Pillai said.