The complainant sold her insured motor vehicle on terms to a purchaser. She notified her advisor of the sale and that the vehicle will remain registered in her name until the vehicle was paid off. Further she notified the advisor of the identity and other relevant details of the purchaser including the address at which the motor vehicle will be kept. Her advisor assured her that her vehicle was covered against theft and damage and she continued to pay the necessary premiums.
A year had almost gone by when the vehicle was stolen from the purchaser’s property. It then emerged that the advisor had failed to inform the Insurer of the change in risk and update the policy, thus the Insurer was completely unaware of the change in circumstances relating to the motor vehicle and were within their rights to repudiate the claim. To add insult to injury, the policy also contained an exclusionary clause that if the vehicle was sold, no cover would be provided. The advisor had failed to draw this to the attention of the client.
Lessons to be learnt
It is of utmost importance that advisors perform their duties in accordance with the General Code of Conduct, which requires an advisor to:
- revisit his duties each time a client’s circumstances change.
- take time to go through policy documents with their clients, checking for exclusionary clauses that may relate to the changed circumstances.
- continuously act with due skill, care and diligence in the interests of their clients.
- make honest and timeous disclosures to clients which must be factually correct to afford their clients with an opportunity to make informed decisions in accordance with what is suitable to their needs.
- immediately inform the Insurer of their client’s change in risk, update policies and enquire whether the Insurer will continue to provide cover and on which terms and conditions. Should the Insurer refuse to provide cover for changed circumstances, advisors then have a duty to immediately inform their client and to advise how best to protect their interests.