In an interview with Moneyweb on SAfm, the Deputy Ombud for Long-Term Insurance, Ms Jennifer Preiss, discussed the potential impact of COVID-19 and the resultant national lockdown on the Long-Term Insurance industry.
Why there might be a rise (spike) in Complaints
The Deputy Ombud warned that a prolonged national lockdown could lead to a spike in complaints relating to credit life and disability policies. Some consumers may expect their income protection policies to pay out for the loss of income they suffer, despite not being disabled as a result of the COVID-19 disease. A spike in complaints may also occur due to policy lapses as a result of policyholders’ inability to afford their monthly premiums. Another possible rise in complaints could be from investments funds performing poorly. However, the Deputy Ombud cautioned that predicting the extent of future complaints is very difficult in these uncertain times.
The Deputy Ombud confirmed that the number of complaints received by the office of the Ombud for Long-Term Insurance have actually decreased during the lockdown period, but this is believed to be a result of policyholders not being at work, or having the facilities (such as data) to lodge complaints.
Why is it important to take note of this possible rise (spike) in Complaints?
It is important for financial advisers to take note of the possible rise in complaints as this should lead to discussions between advisers and clients. Financial advisers must ensure that their clients are aware of what qualifies as a disability and when they will be able to claim income protection. The Ombud for Long-Term Insurance, Judge Ron McLaren, cautioned policyholders, explaining that not all credit life policies have retrenchment or loss of income benefits. If the policyholder is so ill due to the virus, that he or she is unable to work, the policyholder will have to complete the waiting period applicable in terms of the policy, before qualifying for the disability benefit. The waiting period, of course, can be waived by the insurer.
With regards to the policyholders’ potential inability to pay their monthly premiums, the Ombud warned policyholders about non-payment of premiums – urging them to ensure that their premium payments are up to date. He added that insurers mainly follow three basic approaches for providing relief to policyholders. These are premium holidays (with or without cover); extended grace periods; and allowing premiums and cover to be reduced for a certain period and reinstating the cover after the period without underwriting.
It is important that financial advisers understand the needs of their clients and that they can assist their clients accordingly. Advisers should always aim to uphold the principles of treating customers fairly. Ensure that important discussions happen, and that the client is aware of what is expected.
Rise in Funeral Policy Complaints
The 2019 Annual Report of the Long-term Insurance Ombud, revealed that more than 40% of all complaints to the office of the Ombud related to funeral policies.
The Ombud mentioned several possible reasons for the high number of complaints, these appear to be driven by factors such as the number of lives insured; new entrants selling funeral products; the urgent need of funeral benefits to realise; and description of relationship in cover for extended family members.
It is important to have discussions with your client and to explain the product and policy wording in detail to him or her. Ensure proper recording and record keeping of these discussions and interactions in minutes of meetings, Client Advice Records, electronic communication systems (Microsoft teams or Zoom) or e-mail. Should the anticipated spike in complaints realise, it is advisable that you are able to assist your client with the lodging of their complaints. Funeral policies and income protection policies should be explained thoroughly to the clients and their understanding should always be tested. Ensure that you also take your clients level of product knowledge into account. Bear in mind that if the client’s claim is not successful even after lodging a complaint with the Long-term Insurance Ombud, there is a chance that they may question the advice or information that you provided to them. Keeping thorough and detailed records of all client communication and correspondence will clear up any misunderstanding and help to settle any disputes quickly.