The FSCA released a statement on the Momentum/Ganas case following the decision made by Momentum to make payment in relation to a life policy claim after Momentum initially rejected the claim of R2.4 million.
Momentum refused to pay out the life cover claim to the widow of the deceased, N. Ganas, due to non-disclosure of a medical condition he had. Momentum’s decision sparked debate and outrage on social media and other media platforms with people questioning the fair treatment of clients, ethical conduct within the insurance industry, and calls to cancel policies.
The FSCA acknowledges that there is a disconnection between what customers think is fair and what the industry deems fair based on practice and precedent. In law there is a contractual obligation or duty to make full disclosure. Non-disclosure of material facts amounts to a breach of this duty which entitles an insurer to repudiate the claim and cancel the contract.
Following the outcome of the Momentum/Ganas saga, the FSCA is committed to engaging with the insurance industry in an effort to shift practices and promote the best interests of customers. The FSCA are of the view that this matter has provided an opportunity for further engagement with the life insurance industry as a whole and a move to a position of fairness that builds confidence in the sector.
In their statement, the FSCA also highlights the risks of canceling policies:
- A customer who cancels their life policy may find it very difficult, if not impossible, to find new cover if they had developed medical conditions along the course of their policy.
- A life policy taken out when a customer is younger is usually a lot cheaper than a policy taken out when they are older and a new policy taken out by an older person may not just have higher premiums but it may be difficult to get the same cover and limits they had before.
- Early termination of an investment policy could attract charges, and charges could also be payable on entering into an alternative investment.
- If a customer does decide to replace their policy, it is essential to first obtain a detailed comparison of the features and costs of the old and new policies, preferably with the help of a qualified financial adviser.
To read FSCA’s press release, click here.