JENNIFER PREISS
SUE MYRDAL
IS IT FAIR/UNFAIR?
 Senior citizen served a cup of hot coffee at the
drive-through
 Opened the cup in her car and spilled it on
her lap
 Jury: McDonalds negligent; awarded her 3
million dollars
IS IT STILL FAIR/UNFAIR?
 The coffee is so hot (1900 F.) that it caused third
degree burns to thighs/genitals
 McDonalds had + 700 complaints the year before
that the coffee was too hot; warned several times
to cool it by the authorities
 McDonalds admitted that the coffee was not fit
for human consumption at that temperature
 The woman offered to settle for just her medical
bills ($2 000) but McDonalds refused
IS IT STILL FAIR/UNFAIR?
 Coffee must be served (not consumed) at that
temperature for optimum aroma and flavour
 Nobody wants take-away coffee cold
 McDonalds sold several billion cups of coffee per
year
 People know that hot coffee is dangerous – they
should blow on it or hold it away from selves
MISSION
TO RECEIVE AND CONSIDER COMPLAINTS
AGAINST SUBSCRIBING INSURERS AND TO
RESOLVE SUCH COMPLAINTS THROUGH
MEDIATION, CONCILIATION,
RECOMMENDATION OR DETERMINATION
FEATURES OF THE OMBUDSMAN SCHEME
 Independence
 Accountability
 Ready, free access for complainants
 Procedural informality
FEATURES OF THE OMBUDSMAN SCHEME
(cont.)
 Resolution via mediation, conciliation
 Cost effectiveness
 Procedural fairness
 Binding decisions in respect of subscribers
FEATURES OF THE OMBUDSMAN SCHEME
(cont.)
 Retention of Complainants right of access to courts
 Prescription halted during process
 Internal appeal procedure
 Equity jurisdiction
 Voluntary scheme
WHO CAN COMPLAIN TO US?





ANY POLICYHOLDER
SUCCESSOR IN TITLE
BENEFICIARY
PREMIUM PAYER
INSURED LIFE
WHO HAS A COMPLAINT ABOUT A LIFE
INSURANCE POLICY AGAINST A SUBSCRIBING
INSURER
HOW THE OFFICE WORKS
 Not a court
 In considering a complaint we take into account
-
Probabilities (standard is balance of probabilities)
-
Onus of proof
Legal principles
Considerations of equity/fair play
 If not possible to resolve a dispute of fact and both
parties agree, an informal hearing may be held
HOW THE OFFICE WORKS (cont.)

We seek outside expert advice when necessary

We often try to settle a matter

We give a preliminary ruling first – both parties
have further chance to argue

Thereafter a final ruling is made
HOW THE OFFICE WORKS (cont.)

Once a ruling is final the unsuccessful party may
apply for leave to appeal to an appeal tribunal

We can award compensation

We report systemic issues to the industry and
FSB
WHAT WE EXPECT FROM INSURERS
 Responses within time frames
 Full information in response to complaints
 Co-operation in resolving the dispute –
willingness to consider possible settlement
 Feedback if there is a problem
 Documentation attached – see checklist
WHAT WE EXPECT FROM INSURERS
Refer to our website:
www.ombud.co.za
Home
What we do
How to complain
Rules
Common problems
Annual Reports
Information Brochures
Helpful links
Office Personnel
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Papers and Presentations
Process Audit
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Code of Ethics
Newsletters
SUMMARY OF CASES FINALISED
NATURE OF COMPLAINT
TOTALS
% TO TOTAL
2007
Poor service
Claims declined
Non-disclosure
Policy performance
Surrender values
Misselling
Lapsing
Miscellaneous
TOTAL
1 251
2 024
139
318
147
391
122
308
4 700
26%
43%
3%
7%
3%
8%
3%
7%
100%
CASES FINALISED WHOLLY OR PARTIALY
IN FAVOUR OF THE COMPLAINANT
44% of cases are resolved in favour of complainants
NATURE OF COMPLAINT
W/P – 2007
Poor service
Claims declined
Non-disclosure
Policy performance
58%
38%
33%
22%
Surrender values
Misselling
37%
56%
Lapsing
33%
Miscellaneous
TOTAL
41%
44%
SOME CLAIMS ISSUES
DEFENCES

EXCLUSION CLAUSES
 WHAT IS AN EXCLUSION CLAUSE – EXAMPLES
 ONUS OF PROOF
 QUALITY OF EVIDENCE
 BALANCE OF PROBABILITIES
SOME CLAIMS ISSUES
 WAITING PERIODS
 TIME BARRING PROVISION
i.e. TIME WITHIN WHICH TO CLAIM
 INSURABLE INTEREST
 FRAUD
 FULL INFORMATION OF SUSPECTED UNLAWFUL CONDUCT
 GROUNDS FOR SUSPICION
 WHY DISCLOSURE WOULD BE PREJUDICIAL
TRENDS / PROBLEMS IN CLAIMS
DEATH CLAIMS
HIV/AIDS EXCLUSIONS DECLINING
DISABILITY
PSYCHIATRIC CLAIMS
INCOME DISABILITY : DEFINITION OF INCOME
DREAD DISEASE / CRITICAL ILLNESS
DRAFTING & INTERPRETATION PROBLEMS
NON-DISCLOSURE
Long-term Insurance Act of 1998
Section 59 (1) (a)
The obligations of the insurer shall not be excluded or
limited on account of any failure to disclose information
“unless that representation or non-disclosure is such
as to be likely to have materially affected the
assessment of the risk under the policy concerned at
the time of its issue…….”
NON-DISCLOSURE
Section 59 (1) (b)
sets out the test as to whether non-disclosed information
was material or not:
“The representation or non-disclosure shall be
regarded as material if a reasonable, prudent person
would consider that the particular information
constituting the representation or which was not
disclosed, as the case may be, should have been
correctly disclosed to the insurer so that the insurer
could form its own view as to the effect of such
information on the assessment of the relevant risk.”
NON-DISCLOSURE
The “reasonable prudent person” in our view is

neither the actual applicant for insurance;

nor the actual insurer;

but a hypothetical person standing in the shoes of the
applicant, with the knowledge and appreciation that
a lay person would possess of the factors an insurer
would take into account in assessing the risk.
NON-DISCLOSURE
SOME ISSUES:
PARTIAL RESCISSION
FORFEITURE OF PREMIUMS
RECONSTRUCTING THE CONTRACT
NON-DISCLOSURE
UK FINANCIAL OMBUDSMAN SERVICE GUIDELINES:
INSURERS SHOULD ASK QUESTIONS
REMEDY DEPENDS ON FAULT
WHAT WOULD THE INSURER HAVE DONE IF IT
HAD BEEN TOLD THE TRUTH?
CUT-OFF PERIOD?
INTERMEDIARY DEEMED TO BE INSURER’S
AGENT UNLESS THE CONTRARY CLEAR