March 14, 2009
 By Bruce Cameron
Life assurance ombudsman Judge Brian Galgut has firmly and quite rightly stepped in to prevent life assurance companies using unfair tactics to delay or avoid paying benefits.
In the latest newsletter from his office, Galgut cites a dreadful case of a 47-year-old man, with dread disease cover, who died of a stroke. When his spouse submitted a claim to the bank that had sold the policy, the life assurance company (unfortunately not named) then demanded "a death certificate, a copy of his identity document, a personal medical attendant's report, a certificate of the medical attendant and a declaration of identity" and attempted to get the claimant to show that the policyholder had a pre-existing medical condition which would allow it to repudiate the claim.
The complainant told the judge about the ordeal she had to go through to obtain the documentation demanded by the life assurance company.
"I struggled, slept on hospital benches. I spent three days living in danger as I didn't know that I had to pay for the forms, and had nobody to borrow R600 for them," she said.
The spouse had not lived in Bloemfontein where her husband worked as a driver, but in a rural area.
And even when she had the forms she was given the run-around. She submitted the documentation to the bank on September 30, 2008, went back on October 8, was called by the insurer the next day and asked whether medical tests had been done, to which she replied they should check with the doctor, went back to the bank on October 21, called again on November 17 to be asked the same questions about the medical tests, and, on November 26, went back to the bank again to be told there was "no progress".
After two-and-a-half months the assurance company wrote to the complainant requesting a post mortem report and clinical evidence that the deceased had died of a stroke.
When the complainant told the assurance company there was no post mortem (the judge pointed out that no post mortem was required as the policyholder had died of natural causes), the assurance company demanded proof that the policyholder had died of a stroke and had not suffered from a related illness prior to inception of the policy.
What the life assurance company was trying to do was rely on a pre-existing condition exclusion clause to avoid paying the benefit. The clause stated that no benefit would be paid if, "in the opinion of the insurer", the policyholder had a medical condition which "manifested symptoms to the claimant before commencement of this policy" whether "the claimant received treatment for the condition or not".
Galgut says his office told the life assurer that if it wished to rely on a pre-existing medical condition exclusion clause "it would have to obtain the evidence it sought itself. The assurer could not expect the claimant to search for evidence on which the assurer could rely to decline the claim".
Galgut said there was no evidence of a pre-existing condition and suggested that the life assurance company pay up with additional compensation.
Galgut has said his office has now introduced a new policy of naming and shaming offending life companies if no settlement is reached. This is one case where both the bank and the life assurance company should be named.
This saga is all the more disgraceful because it affects someone from a low-income group.
Galgut says that life assurance companies cannot place the burden of producing medical evidence about a policyholder's medical history on the claimant. All the claimant has to do is provide evidence to substantiate the claim.
Lapsed cover compounds tragedy
I was recently involved - on the fringes - in a terrible story, made all the worse because of the non-payment of a funeral policy premium.
The story involves Xola Genu, a promising 17-year-old who was about to write his matriculation examinations. He was sent by his mother to buy R10 of electricity from a local spaza shop in Nyanga, Cape Town. On the way, he was accosted by a group of thugs.
In an attempt to escape them, he ran into the road, where he was hit by an oncoming vehicle. He did not survive the accident.
His family has traditional values and wanted to bury him in the Eastern Cape.
They hoped to cover part of the cost from a family funeral policy. The problem was that the premiums were not up to date and the life company rejected the claim. The company did offer to reassess the claim, but on my reading of the documents it is within its rights.
My one criticism is that the policy documents are far from being written in simple language … and I do think policy documents should at least be summarised in the vernacular of the policyholder.
This sad story highlights the importance of keeping up the premiums of any risk policy. You never know when disaster will strike, particularly in a society where crime rates are unacceptably high.
The Genu family were hit again while they were away at the funeral in the Eastern Cape - the home of Xola's aunt was burgled.
This untimely death has cost the Genu family many thousands of rands they can ill afford, while a hard-working young man, who could have made a real contribution to the country and the future wellbeing of his family, is no longer here because thugs seem to rule the streets in the townships.
Correction
In a column published on February 21 I incorrectly stated that a retirement fund consultant, Jacques Malan Consultants and Actuaries, was one of a number of retirement fund consulting companies facing criminal charges for assisting in facilitating the stripping of surpluses from various occupational retirement funds in the 1990s.
Jacques Malan Consultants and Actuaries was initially charged in relation to the stripping of an R28.8 million surplus from the Picbel Pension Fund, to which they acted as consultants, but the criminal charges were withdrawn last year. Since the withdrawal of the charges against Jacques Malan Consultants and Actuaries, the then chief executive of Picbel, Jan Pickard junior, in a plea- bargain agreement, pleaded guilty to his role in the theft of a R28.8 million surplus from the fund while he was also the fund's principal officer.
  
 
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