Be truthful to both spouses, insurance consultants told
The deputy ombud for financial advisory and intermediary services has cautioned credit life insurance consultants to make proper disclosure to both parties in a marriage about exclusion clauses.
Deputy ombud for financial services providers Noluntu Bam made the point when dismissing a complaint brought against SA Home Loans by Catharina Elizabeth du Plessis of Polokwane.
According to Du Plessis, she and her late husband obtained a home loan from SA Home Loans and a mortgage bond was registered over their jointly-owned property as security.
The couple was married out of community of property.
As further security credit life insurance was taken on the lives of both spouses on August 29 2005 and the policy commenced on November 1, 2005.
The insurance cover was underwritten by SA home Loan Life life Assurance Company (SAHL Life), an associate of SA Home Loans.
When Du Plessis's husband died on May 13 2007 she duly submitted a claim.
The claim was repudiated on the grounds that the deceased died of a pre-existing medical condition within 24 months of the inception of the policy.
But Du Plessis claimed that she and her late husband were "misled" when the life assurance was offered because she, as co-owner of the property, was not contacted by the company
She alleged that her husband could not have agreed to "this kind of life assurance" on her behalf.
She also said that to her knowledge, no policy documents were issued because she did not see or receive any.
Neither she nor her husband was made aware of the fact that due to his condition, there was a possibility that the death benefit would not be paid out, she claimed.
Du Plessis was of the view that her husband was not properly advised about the exclusions. So she wanted SA Home Loans to settle the outstanding balance on the bond as at the date of her husband's death.
The home loans company supplied the office of the Fais ombud with documents and a voice recording of the telephonic discussion between the company's consultant and the deceased when the mortgage insurance was sold to him.
When asked by the consultant about the state of his health, the deceased disclosed that he had had a heart attack about three months earlier.
The deceased was then told that he would not be covered for his heart condition for 24 months.
He died almost 19 months later of a heart attack, that is, within the 24 months-exclusion period.
Bam found that the insurer was correct in repudiating the claim since it was clear from the voice recording of the discussion between the respondent's consultant and the deceased that the latter was informed of the exclusionary clause, and he accepted it.
Bam said: "No blame could be imputed on the respondent or its consultant because there was proper disclosure in terms of the Fais Act."
But Bam also said that since the respondent was rendering the financial service through direct marketing, they cannot speak to only one of the spouses.
Bam said: "Both the complainant and her late husband were covered under the policy.
"The policy terms and exclusionary clauses were disclosed to the deceased only. The question is, what would have happened if she had any pre-existing medical condition of which she had died and her husband had survived?"
"The respondent is well advised to change its stance on this point and to ensure that its consultants make proper disclosure to both spouses."