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South African Customer Satisfaction Index – Who got the most “likes” in the life industry?

The latest South African Customer Satisfaction Index (SA-csi) for life insurance has just been released. According to Consulta that conducted the research “insurers are heading into an environment where consumers will be under tremendous financial pressure and questioning the value proposition of all their financial planning solutions”.

“For at least the medium term, South Africa faces a heavily constrained economy, high and growing unemployment and technological disruption, all impacting the financial services sector and how it engages with customers. Customer mindsets, approaches to their financial planning products and providers are likely to undergo radical change in a post-Covid economy, as will all consumer discretionary spending. Brand loyalty will come under significant strain as customers scrutinise aspects such as perceived value for money, overall customer experience with their brands, and whether they trust their providers to pay out in their time of need. If markets were challenging before, they are about to enter unprecedented competition in a recycled and shrinking consumer pool that will demand laser-like focus by insurers on customer satisfaction if they are to keep churn rates in check,” Ineke Prinsloo, Head of Customer Insights at Consulta explains.

The benchmark measurement for Life Insurance (2019) provides important insights into the levels of customer satisfaction of South Africa’s major life insurers - Absa Life, Discovery Life, FNB Life, Liberty, Metropolitan, Momentum, Old Mutual and Sanlam – and will have a distinct bearing on how customers respond in an inevitably tough economy.

One of the key take outs of the measurement shows that big brands are struggling to meet customer expectations. Although most of the brands met or exceeded the industry standard, a few showed a slight decline. Absa Life, FNB Life and Old Mutual are leading the industry. It is interesting to note that two of the three leader positions are held by banks – Absa Life and FNB Life - and not traditional life insurers.

The research also highlighted that simplicity is key. When customers have a clear understanding of what they are signing up for, there is less chance that they will be disappointed when it comes to claiming. Furthermore, products need to be easy to understand and staff members and/or financial advisers should provide customers with frequent and relevant feedback during the process of interaction.

The degree to which customers feel they are being treated fairly by their insurer is highest with Absa Life (86,5), FNB Life (85,6), Metropolitan (83,5), Old Mutual (83,3) and Sanlam (82,4) - all above industry par of 81,9. Discovery Life (75.9), Liberty (77.7) and Momentum (77,7) are not on par with the rest of the industry.

Complaint resolution
●In terms of complaints incidence and handling, Absa Life has the lowest complaint incidence (6,2) which is well below the industry par (10,6) and it also has an exceptionally high complaint resolution rate (70,6). Liberty also performs well on this front, with a Complaint Incidence score of 9,2 and a solid Complaint Resolution rate of 63,2.

●Both Absa Life and Liberty show massive improvements in their Complaint Handling scores, which suggests that this has been a key focus in the businesses since the 2018 index.

●Discovery Life performs worst on this measure with a high complaint incidence rate of 10,8 and the lowest complaint resolution rate of 38,7 – both scores fall well short of the mark in terms of industry par, and both scores have shown significant decline when compared with 2018 scores.

●Discovery Life and Sanlam all show a big increase in complaint incidence compared to their 2018 scores.
Two thoughts to consider in view of the above:

●It may be well worth revisiting the six expected Treating Customers Fairly outcomes and measure yourself against this. A client’s experience, from start to finish, will be the measure of your success.

●Product simplicity most certainly contributes to better understanding, and fewer complaints.
Financial advisers are the face of customer experience and play a hugely important role in managing customer satisfaction. This needs to be backed up by sterling service to avoid the messenger being shot.

Business interruption cover – Insurers facing an avalanche of bad press

In what Moneyweb terms “…a David and Goliath clash…”, the media has joined the fray in highlighting the matter.

While several moving emotional pleas were made, there is also legal action.

According to Moneyweb Ryan Woolley, CEO of ICA, said that his group is now representing more than 500 mainly tourism and hospitality industry businesses in the battle with insurance groups. This excludes hundreds of similar Covid-19 business interruption insurance disputes being handled by other firms and attorneys in the country, which will most likely take the claims to several billion rand.

Their efforts to come to an agreement was rejected by the insurers on the grounds that not all those who were included in the group had the contagious disease extension in their contracts.

A court case involving the owner of a boutique hotel and restaurant group, set for early September, is likely to provide clarity on what constitutes a legal claim. Insurers are adamant that the national lockdown was not the insured peril, while claimants argue that the lockdown was the direct result of the Covid-19 virus.

One insurer’s “Contingent Business Interruption” clause contains a condition that the disease should have been present at the premise or within a fifty kilometre radius, and that access to the area should have been restricted by a municipal, regional or government authority. This did in fact happen, and before the actual date of the lockdown.

Another important consideration which needs to be borne in mind is the legal principle that uncertainty in an insurance policy is construed against the insurer, as it is the duty of the insurer to provide clarity on what risks are excluded.

The fact that most claim repudiations took five weeks and longer would seem to indicate that insurers, too, did not have absolute clarity on the matter.

It appears that some insurers are still negotiating with the FSCA on its guidelines contained in FSCA Communication 34 of 2020 on which conditions, when met, should lead to the payment of claims.

Given the huge role the hospitality industry plays in terms of employment, and its contribution to the stuttering economy, it is essential that legal clarity is obtained as soon as possible.

For many affected policyholders whose income has been reduced to zero over the last three months, their single biggest current expense is, ironically, their insurance premium. They cannot afford not to pay this, as it would mean forfeiting future claims, should the courts find in their favour.

The importance of the FSCA RE Preparation Guide

Every day, RE candidates ask: “What steps do I need to take to ensure that I have access to all the information I need to study for the regulatory exams?”

One of our first questions to the candidate is: “Have you downloaded the Prep guide?”

The Preparation Guide outlines exactly what the examination will be testing and where to find the information.

Studying the Preparation Guide is in fact the very first step a candidate should take to ensure that he or she knows what they have to know, and where to find the required information. This is the best approach to follow when planning and preparing for the Regulatory Examination as it is highly effective and does result in a better outcome.

The qualifying criteria provide the basis of knowledge and skills against which the regulatory examinations are set. Only questions based on these criteria will be included in the exams.

Students are therefore advised to download and use the FSCA Preparation Guide.

Please click here to download the latest Preparation Guide, which also includes the most recent updates to the qualifying criteria.

Latest legislation:

To access the latest legislation and applicable Board Notices, please visit the FSCA website.

Click on Regulatory Frameworks

Click on Legislation

Click on applicable Act or Board Notice e.g. Financial Advisory and Intermediaries Services Act (FAIS Act) (Act 37 of 2002:

The Moonstone website, www.moonstone.co.za contains a wealth of RE information. Visit the website to acquaint yourself with what to expect when you write.

Our registration call centre is available weekdays during business hours (08h00 – 16h00). Contact 021 883 8000 / 888 9796 or e-mail [email protected].

Moonstone Fintech Reshaping the financial world – But what about you … By Janine Geldenhuys on 6 February 2020 0 Reshaping the financial services industry by “removing market inefficiencies” sounds suspiciously like trying to eradicate human error. This raises the very serious question about the funct...

Robo-advice – Compliance still key

The ability to deliver a consistent level of service across all channels is an increasingly important competitive differentiator for financial services providers. This was one of the outcomes of a recent international study of financial service consumers by Accenture. Besides the consistency, all channels, face to face or online, should also comply with all regulatory requirements. The provision of financial services via online platforms, i.e. robo-advice, is such a channel.

In the latest FAIS Ombud Annual Report, Naresh Tulsie emphasises that robo-advice solutions also need to conform to the provisions of the General Code of Conduct and that the required disclosures be made to ensure that the prospective client is placed in a position to make an informed decision as to whether the specific solution meets his/her financial needs and circumstances. Tulsie points out that there has been an increase in robo-advice complaints. “We have been successful in bringing about positive solutions by focussing specifically on the nature and extent of disclosures provided by these online solutions and whether the complainant had been able to appreciate the implications of the selections being made and whether those disclosures had been sufficient to have allowed the complainant the opportunity to make an informed decision,” he stresses.

A case in point

In a complaint received at the Ombud’s office, the complainant was the owner and the policyholder of a Medical Insurance policy, which commenced on 1 December 2015. The policy covered both the complainant and her husband, providing benefits for emergency medical services, illness and dread disease.

On 30 November 2017, the complainant’s husband complained of stomach pains which led him to contact the respondent for authorisation. On 2 December 2017, the complainant’s husband underwent a gastroscopy which led to him being admitted to hospital.

Preauthorisation was requested and declined on the basis that in terms of the policy wording, illness means the onset of any acute somatic, unforeseeable, unpredictable illness (excluding mental illness) which requires admission to hospital, and which was not a pre-existing condition.

The complainant stated that she was never advised about this exclusion of cover, and wanted the respondent to resolve the matter in respect of the outstanding medical expenses.

After entering into correspondence with the respondent, where the respondent’s duties to comply with the General Code of Conduct in respect of disclosures of material terms of the policy were explained, the respondent argued that the sale of this policy was done online via the website.

According to the respondent the complainant completed the documents on her own, and the application was submitted without any advice having been provided. However, the Ombud’s Office was of the view that the transaction, which amounted to robo-advice, did not absolve the respondent from ensuring that the complainant was made aware of the material aspects of the policy in order for her to be able to make an informed decision. As a result the respondent was requested to provide the Ombud’s Office with details of the process followed when one applies online, what disclosures are made and what information is provided to prospective clients in respect of the exclusions applicable to the policy.

The respondent did not respond to the requests from the Ombud’s Office. Instead, it took the decision to settle the matter with the complainant and an amount of R7 829 was paid in full and final settlement of the claim.

We trust that the provider was one of those to whom the Ombud referred when he said: “We have been successful in bringing about positive solutions by focussing specifically on the nature and extent of disclosures provided by these online solutions…”

While robo-advice capabilities are improving dramatically, several research studies have indicated that personal connections will remain essential for many clients. It’s about delivering a coherent experience across all channels and ticking all boxes, from advice to servicing, including TCF and all regulatory requirements.

Material misrepresentation leads to rejected claim

In a recent Short-term insurance case study, the Ombudsman for Short Term Insurance (OSTI) emphasised that short-term insurance contracts are entered into in good faith. “Under common law, a policyholder when requesting cover must make full disclosure of all matters material to the insurer’s assessment of the risk. This principle is founded on the insurer’s legal right to be informed of all the material facts to enable it to properly assess the risk. An insurer has the right to void a contract of insurance if the proposer has misrepresented a material fact,” OSTI remarks.

These remarks are as a result of a case where an insurer declined liability for a claim based on the following grounds:

1. Fraudulent Claim: Misrepresentation of relevant information
2. Non-Compliance: Lack of Reasonable Proof of Ownership.
Alleged loss by client

● Mrs V’s policy incepted with her insurer on 26 November 2018. She enjoyed “All Risks” cover for portable possessions.

● Mrs V submitted a claim to her insurer in respect of the theft of her laptop and camera out of the boot of her motor vehicle, which occurred on 2 April 2019.

● The laptop and camera were specified under the policy.

● Mrs V also had cover for her motor vehicle and household contents under the policy.
Reasons for the insurer’s claim decline

● The insurer stated that Mrs V failed to disclose additional claims submitted to her previous insurer during the relevant three year period.

● She only advised of one occurrence to the value of R20 000.

● A TransUnion Claims Enabler Report recorded 12 claims to the total value of approximately R291 499.00.

● Mrs V’s previous insurer also advised that her previous policy was cancelled based on “unfavourable claims history”.

● As a result the insurer advised that the underwriting information provided by Mrs V was incorrect.

● It rejected the claim and voided the risk based on material misrepresentation and dishonesty.

● The assessor also found that Mrs V claimed for the same items under her previous insurance and was compensated accordingly.

● The insurer further argued that it would not have concluded a contract of insurance with the client had it been aware of her insurance loss history.
The Ombudsman’s findings

OSTI quoted a Supreme Court of Appeal case which stated: “There is a duty on both insured and insurer to disclose to each other prior to the conclusion of the contract of insurance every fact relative and material to the risk (periculum or risicum) or the assessment of the premium. This duty of disclosure relates to material facts of which the parties had actual knowledge or constructive knowledge prior to conclusion of the contract of insurance.”

Therefore, in OSTI’s’ view a ‘reasonable person’ in the position of Mrs V would consider that the additional losses and claims may influence the insurer’s assessment of the risk and should, therefore, be disclosed.

Based on the examination of the initial transcript, the OSTI was satisfied that the underwriting questions relating to Mrs V’s loss history were clear. OSTI also confirmed that Mrs V was advised at the commencement of the underwriting conversation that the information she provided must be true and complete. She was also informed that incorrect information may affect the outcome of her claims.

Osti’s view was that the insurer was justified in its decision to avoid the risk on the ground of a material misrepresentation. The rejection of Mrs V’s claim was therefore upheld.

Misrepresentation in numbers: Last year’s OSTI Annual reports shared that the secondary cause for complaints was rejections based on the insured’s alleged non-disclosure or misrepresentation of underwriting details at sales stage. However, OSTI saw a 22% decrease of such complaints in 2018 compared to 2017. OSTI has always emphasised the importance of the insured’s contractual obligation to provide true and complete information when taking up a policy or updating it. Insurers are also required to conduct the sales process in accordance with the agreed industry code. What will the stats show this year …let’s wait for April 2020 to see!

Tribunal Debarment Decision – Wilful disregard of FAIS requirements not acceptable

The abhorrent practice of submitting a single premium investment as a recurring premium policy to earn substantially higher commission is nothing new. If you then, in addition, destroy documentary evidence in the hope that you will not be found out, you should expect dire consequences. An even worse case scenario: if you repeated such a misdemeanour on more than one occasion.

This formed the essence of a recent request from an adviser for reconsideration of a debarment by a product provider.

Details are contained in a recent Tribunal case

According to the FSP, the applicant contravened its financial advisory processes, the FAIS Act and the General Code of Conduct:
ContraventionHer actionsFailed to render financial services honestly, fairly and in the integrity of the financial services industry.Abused her position of trust and authority as a financial planner.Failed to exercise her judgment objectively in the best interest of the client.She acted against or in disregard of a client's investment wishes and/or gave her wrong financial advice.Requested third parties to amend instructions or documentation and thereby amending initial instructions without the knowledge or required consent of the client.She instructed an insurer to make changes to the payment method initially agreed to on by the client without the client's consent or knowledge.Failed to follow processes with regard to record-keeping, thereby contravening the respondent’s processes and the FAIS Act.She shredded or destroyed client files, something against the respondent’s policies and procedures and regulatory legislation.

Grounds for applicant’s appeal for reconsideration

According to the applicant’s legal adviser, the application for reconsideration raised four issues:
1.The applicant alleged that she acted on the client’s (apparently verbal) instructions2.She acted honestly and diligently in providing financial advice;3.She did not intend to destroy any client document; and4.The disciplinary and debarment proceedings were brought to stifle competition.

The Tribunal’s finding

Fit and Proper

Although the applicant raised various reasons for the advice and options offered to the client, the Tribunal found that the applicant should have advised the client to conclude lump sum investments with the funds at hand instead of investments based on monthly premiums which were not sustainable. On her own version, it means that she did not advise the client of the option to make lump-sum investments instead of periodic investments. The denial of the applicant that she knew of the difference in commission structure was found to be improbable. This led to the conclusion that the way the policies were structured was to earn higher commission. If her denial were true, it means that she is not competent to act as adviser.

Destruction of client files

The Tribunal found that the destruction by the applicant of her client files amounted to a contravention of or failure to comply with a provision of the FAIS Act in a material manner. “We hold that the applicant’s excuses do not cut ice and that she was correctly found to have contravened or failed to comply with any provision of the FAIS Act in a material manner,” the chairperson of the Tribunal reiterated.

The applicant destroyed all her physical files. According to her she misunderstood the respondent’s instruction about the storage of files. She thought that if they were uploaded on her One Drive cloud file, the physical documents could be destroyed. However, investigation showed that only one file existed on her One Drive cloud file.

Ulterior purpose

The Tribunal dismissed this ground for reconsideration as the issue before them was purely factual and that is whether the jurisdictional facts for debarment were present. They pointed out that it is an application for reconsideration and not an appeal, and an attack on the reasoning of the key individual is in itself of limited value because the tribunal has to reconsider the facts.

Grounds for debarment

The Tribunal concluded that the jurisdictional ground for her debarment was satisfied and set the appeal aside.

In conclusion, the Tribunal noted the following interesting observation:

“Barring is not akin to a sentence. As long ago as 1778, Lord Mansfield stated in Ex parte Brounsall Cowp 829 that debarment (in that case of a solicitor) is not a punishment and that the question is rather whether the person concerned in the light of the conduct would be free from suspicion. In other words, debarring is for protecting the public and is not punitive,” the Chair of the Tribunal concluded.

Click here to download the case study that details the non-compliance of the financial adviser.

The importance of the FSCA RE Preparation Guide

Every day, RE candidates ask: “What steps do I need to take to ensure that I have access to all the information I need to study for the regulatory exams?”

One of our first questions to the candidate is: “Have you downloaded the Prep guide?”

The Preparation Guide outlines exactly what the examination will be testing and where to find the information.

Studying the Preparation Guide is in fact the very first step a candidate should take to ensure that he or she knows what they have to know, and where to find the required information. This is the best approach to follow when planning and preparing for the Regulatory Examination as it is highly effective and does result in a better outcome.

The qualifying criteria provide the basis of knowledge and skills against which the regulatory examinations are set. Only questions based on these criteria will be included in the exams.

Students are therefore advised to download and use the FSCA Preparation Guide.

Please click here to download the latest Preparation Guide, which also includes the most recent updates to the qualifying criteria.

Latest legislation:

To access the latest legislation and applicable Board Notices, please visit the FSCA website.
Click on Regulatory Frameworks

Click on Legislation

Click on applicable Act or Board Notice e.g. Financial Advisory and Intermediaries Services Act (FAIS Act) (Act 37 of 2002:

The Moonstone website, www.moonstone.co.za contains a wealth of RE information. Visit the website to acquaint yourself with what to expect when you write.

Our registration call centre is available weekdays during business hours (08h00 – 16h00). Contact 021 883 8000 / 888 9796 or e-mail [email protected].

Moonstone Save the date – 2020 Annual Compliance Webinar By Janine Geldenhuys on 13 January 2020 0 The annual webinar, aimed specifically at Financial Services Providers NOT required to appoint a compliance officer, will be hosted on Thursday, 13 February 2020. The session will once again provide insight in...