FSPs can take steps to avoid a situation where they are facing a FAIS Ombud complaint after an insurer declines a client’s claim.
There are examples where FSPs help their clients to submit a claim to the insurer and it backfires. The insurer repudiates the client’s claim, so the dissatisfied client looks to the advisor to take responsibility.
As an illustration, a client buys a vehicle and asks the dealer to contact the client’s FSP to arrange for it to be insured before he takes possession of the vehicle. The FSP insures the vehicle for personal use.
Two months later the vehicle is written off in an accident. The FSP puts in a claim on the client’s behalf and the insurer determines that the vehicle was used for business use and declines the claim. The client is unhappy and lodges a complaint. The FSP realises the office made a mistake and informs its professional indemnity (PI) provider. However, the PI provider repudiates the claim as it was not informed about a possible claim as a result of a mistake made by the FSP’s office.
How to avoid repudiated claims and client complaints
To avoid repudiated claims and client complaints, you will need to follow an effective advice process. If you are recommending a financial product, ensure you know exactly how the product is designed and if it suits the client’s needs and circumstances.
Have a process to check that the information sent, and documentation received from the product supplier, such as a Policy Schedule, are correct. Ensure that you review clients’ circumstances and their financial products at least annually. Make sure clients’ information is updated and rectify any incorrect information if it was sent to a product supplier.
Also ensure you have a proper onboarding process for new clients, so you can evaluate the relevance of the financial product(s) to new clients’ needs. Have a robust business process on how to deal with post-sale barriers such as claims and complaints and keep records of all your discussions and correspondence with clients.
If you receive a client complaint
If you receive verbal or written dissatisfaction from a client, which may be due to a repudiated claim, be sure to follow the process set out in your Complaints Resolution Process. Acknowledge receipt of the client’s complaint and let them know you will look into the matter.
Investigate the process that was followed in your office. If it is possible that you or one of your employees made a mistake, notify the PI provider of a potential claim. Most PI policies include a specific timeframe in which you must notify the insurer of a potential claim. Make sure you understand the terms and conditions of your PI policy and follow the correct claims process. As the nature of PI insurance is to reimburse the insured (i.e. the FSP) for loss, the PI insurer will act according to its rules and decide whether to pay the claim or not.
Once you have investigated the cause of the client’s complaint, you will need to inform the client of the outcome together with reasons. If this is not favourable to the client, the client must be advised of his or her right to pursue the matter with the FAIS Ombud.
The Office of the Ombud for Financial Services Providers (the FAIS Ombud) primarily acts as a shield to protect consumers and increase the level of integrity within the financial services industry, through the resolution of complaints impartially, timeously, and economically.
The FAIS Ombud is there to investigate and resolve complaints according to rules promulgated under the FAIS Act.
- The FAIS Ombud can only make determinations of up to R800,000.
- If the claim is in excess of R800,000 then such a client can abandon the amount in excess of R800 000 or seek relief from the High Court.
Sometimes clients go straight to the FAIS Ombud instead of first submitting their complaint to the FSP. If a complaint is submitted to the FAIS Ombud before you become aware of it, immediately notify your PI provider.
A client may appoint an attorney if his or her insurance claim is declined and be advised to lodge a claim against you, as you have PI cover. Ensure you have processes in place to justify the processes you followed. A robust advice process and proper record keeping will help you to substantiate the advice given and the information on which it was based.
Dealing with a client after a complaint
When a relationship with a client is important to you and you want the client to stay with your business, you should take proactive steps to preserve the relationship. To do this, you can make an appointment with the client and try and secure the relationship and find common ground on how to proceed. Continuous communication with your client is important.
If the client terminates his or her business relationship with you, ensure that you follow the client termination process in your business. This must be based on the steps set out in the General Code of Conduct. Maintain a professional approach throughout this process, as the client is likely to talk to friends, family and colleagues about the experience.
Office processes are important for the business and staff need to know and understand the consequences of their actions. It is easier to stop something from happening in the first place than to repair the damage after it has happened.
If things go wrong, however, make sure you treat clients fairly throughout the process and keep them informed. Inform your PI provider about a possible claim as soon as you become aware of it. This will enable the provider to test the validity of the claim and mitigate the consequences if the claim materialises.