STEPHEN CRANSTON: Hello, complaints?

One of the most misguided government policies at the moment is the determination to bring all the financial services ombud offices together into one centralised state-run body.

The voluntary industry-based offices already do the job efficiently and fairly.

The long-term insurance ombudsman’s office, for example, completed 91% of cases within six months and more than a third within 30 days. And even though it is funded by the industry, it still found 34% of cases in favour of the client, compared with 28% in 2016.

The office awarded R200m in lump sums back to clients in 2019. Its cost per standard case (met by the life companies, not the clients) is R4,086, which I suspect is much lower than a huge centralised complaints bureaucracy could achieve.

So I was sorry to see the insurers cave into demands from the National Treasury to merge the long-term and short-term ombud offices.

To some extent, however, it will be business as usual, as long-term will still be run from Cape Town and short-term from Joburg.

The bulk of cases — 42% — concern funeral policies, and deputy long-term insurance ombudsman Jennifer Preiss tells me the problems around funeral policies are not easy to solve.

Service levels for funeral policies are far worse than in the rest of the life insurance industry

Judging by the number of complaints, service levels are far worse than in the rest of the life insurance industry. Preiss says the number of complaints has not increased at anything like the level of new policies in issue, which should indicate that life offices are taking their obligation to be fair much more seriously.

Credit life has for many years been a notoriously inequitable part of the industry, where furniture retailers often made more money from financial products than they did from the sales margin itself.

But this segment has declined from 9% to 8% of total complaints as more credit is issued by the banks, which take a more professional approach.

One of the advantages of the voluntary ombud offices over the statutory offices (such as the pension funds adjudicator) is that the voluntary offices apply equity or fairness rather than the letter of the law.

Poor approach to fairness

Preiss says there are unfortunately outliers with a poor approach to fairness. It is surprising to see that the majority of final determinations, in which the names of the offending insurers are published on the life ombudsman’s website, are dominated by Sanlam companies such as Sanlam Sky, Centriq, Safrican and BrightRock.

It can’t do the group’s reputation any good. Incoming Sanlam CEO Paul Hanratty should take note.

Otherwise the worst offenders included 3Sixty Life — three-quarters of complaints against it went in favour of the client.

Abacus Insurance was even worse, losing 86% of complaints. Perhaps it is time they worked with something more sophisticated than an abacus.

NestLife Assurance lost 80% of cases and Safrican 64%. Of the better-known names, Hollard Life and PPS were the worst, losing 43% of cases.

In the past we might have expected to see a higher level of complaints from direct players, particularly from business sourced through cold calling.

But in fact 1Life and Outsurance Life had a similar experience to the large legacy insurers, losing about a third of all cases.

The long-term insurance ombudsman proves the old adage: if it ain’t broke don’t fix it.