Over the course of the pandemic, the reputation of one financial services sector has been hit more than any other. The short-term insurers were portrayed as callous for not paying their clients’ business interruption clams. Hotels, restaurants and B&Bs, devastated by the series of lockdowns, hoped to get a lifeline from their insurers. Instead, they were turned down on technical grounds.
Loss adjuster Ryan Woolley came across as the people’s champion for leading a consortium of clients against the insurers — a media hero unprecedented since Vuyani Ngalwana SC was pension funds adjudicator and forced life insurance companies to increase their termination payouts on retirement annuities.
Some insurers were happy to pay out — like Outsurance, which won kudos for paying R220m of claims in full. Easy enough, as this was a drop in the ocean for it. At Discovery Insure, CEO Anton Ossip looked shrewd (as he is) for not offering the cover in the first place. But Santam stood behind the technicalities and went to the courts to stop paying. This might have made sense for lawyers and actuaries, but the PR — or what we now call the "optics" — was terrible. A big embarrassment for those us who’d considered Santam to be a highly ethical business.
But the long-term insurers can’t afford to be smug either. The office of the ombudsman for long-term insurance saw a 48% increase in complaints in the first half of 2021, while it recovered R77.9m in claims over the six months, a little less than the R90.3m recovered in the first half of 2020. Complaints to the ombud are free, as the industry pays the running costs of the office. And there is an agreement that life offices will not drag their feet by appealing cases through the courts. Three-quarters of complaints to the ombud are transfers from life offices which would like it to play Solomon and decide the outcome. A clubby arrangement perhaps, but preferable to the adversarial route of endless litigation.
Clients should have been shown more compassion for skipping payments they couldn’t afford
Still, it is easy enough to point to the office’s conflict of interest, which is why the credibility of the deputy ombud is important. Much like a university vice-chancellor, the deputy runs the office, reporting to a ceremonial boss, usually a retired judge. Present deputy ombud Denise Gabriels’s predecessor, Jennifer Preiss, built a reputation at the office for unimpeachable fairness. Many policyholders consider the ombud the last resort to get paid, and 34% of cases were resolved in favour of the client over the period, up from 30% in the comparable half-year.
Gabriels says there was a large rise in funeral policy complaints after the December 2020 holidays. Many insurers that had promised to pay claims in four hours fell short. Sadly, the ombud’s office can’t promise to resolve claims in four hours either. It is run by lawyers after all, and it is proud that 93% of its cases are resolved within six months.
Many of these cases are not dramatic in their own right, unlike the business interruption cases of restaurants such as the Stellenbosch Kitchen or iconic hotels such as Cathedral Peak. But they do indicate that life insurers aren’t always standing by their clients in a time of need. There has been a significant rise in complaints about life assurers that have, often callously, lapsed policies. Clients should have been shown more compassion for skipping a few months’ payments they couldn’t afford. These life offices are, after all, powerful institutions with massive retained earnings.
And none of them are anywhere near the threat of insolvency.
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