By Dr de la Rey
The Office of the Ombudsman for Long-term Insurance (OLTI) commissions an independent review of the Office every four or five years. Past reviews have been undertaken by Prof JC van der Walt (2005) and Adv. Neville J Melville (2009).
In preparing this review, I spent a week at the offices of OLTI in Cape Town, familiarised myself with the processes followed by the Office, interviewed every staff member, attended a management meeting, attended a meeting of assistant ombudsmen, reviewed a random number of case files, interviewed members of the Council, the liaison Committee, senior employees of the Financial Services Board, internal ombudsmen of industry members and a random selection of complainants. I also studied a substantial number of documents, including the Constitution of the Council and the Voluntary Association, the Ombudsman’s Rules, minutes of meetings and various other sources.
In this review, I have used the guidelines to the fundamental principles to which their members should aspire, compiled by the International Network of Financial Services Ombudsman Schemes (the INFO Network). These principles have been analysed and then tested against the way in which OLTI functions. I have also analysed the views of stakeholders about OLTI, evaluated the role of internal arbitrators of insurance companies, looked at possible statutory protection for voluntary financial ombudsmen and evaluated compliance by OLTI with the Ombudsman’s Rules (the Rules).
Recommendations made in this Review are listed in Addendum 1, in the order in which they have been made.
1. FUNDAMENTAL PRINCIPLES OF AN OMBUD SCHEME
The fundamental principles to which an ombud scheme should aspire, as compiled by the INFO Network, are –
1. 1 Independence and impartiality
Financial ombudsman schemes are an alternative to the courts and should therefore be, and be seen to be, independent and impartial, resolving cases on their merits without fear or favour.
1.1.1 OLTI is a voluntary association, governed by a Council and has a liaison Committee. It is recognised by the Financial Services Ombud Schemes Council in terms of section 11 of the Financial Services Ombud Schemes Act, 37 of 2004. OLTI therefore complies with the requirement that it must either be established in law or in a constitution that is approved by a public-interest agency.
1.1.2 The parties to disputes should not be in a position to exert commercial or other influence over the financial ombudsman scheme, directly or indirectly.
The Ombudsman’s Council, the governing body of OLTI, consists of ten members. It is chaired by a judge of the Supreme Court of Appeal. Ex officio members include the Deputy Registrar of Insurance, the chairperson of the Ombudsman’s Committee and the Ombudsman. The other six members include a retired chartered accountant, an independent consultant, the chairperson of a reinsurance company and a life insurer, an independent consultant in consumer affairs and former Project Manager: Debt Counselling of the National Credit Regulator, a retired judge and a regional manager of a free national information, advice and referral service, the Black Sash.
As a body, the Council would appear to represent a diverse range of interests and have a wide range of valuable skills and experience, neither balanced in favour of the long-term insurance industry nor consumer activism.
1.1.3 The financial ombudsman scheme should be free to publish reports on its work and on issues that give rise to complaints.
Despite interviews with a broad range of stakeholders, I found no indication of any limitation on the right of the Ombudsman to publish or report on any issues.
184.108.40.206 A specific question asked to internal arbitrators or other representatives of insurers, was Do you have any comments about our publication of complaints data? No negative comments were made, whilst more than one respondent took time to explain that, before the complaints data was published for the first time, the issues were thoroughly workshopped and thrashed out with Industry, to such an extent that the data is now seen as being helpful. One respondent has requested that complaints data be published more often, possibly on a quarterly basis.
220.127.116.11 The Ombudsman has also been able to alert the industry, the public and regulators to trends which may indicate fraudulent activity, such as excessive claims on hospital cash plans, through publication of its concerns.
18.104.22.168 Provision is made in rule 3.8 of the Rules for publication of determinations, including a summary of the facts, provided the identity of a complainant is not exposed.
22.214.171.124 The publication of relevant information by the Ombudsman is done with the necessary restraint so that it is seen in a positive light, and as being helpful, instead of being perceived as a threat.
1.1.4 Case decisions should be made by an ombudsman or a decision panel.
OLTI follows a single decision making model, with a number of checks and balances built into the procedure. The procedure as well as the checks and balances, are discussed in more detail in par. 1.1.6 below.
1.1.5 An ombudsman should not have worked, in the previous three years, in a financial business (or an industry association for the sector) covered by the ombudsman scheme.
The present and past Ombudsman for Long-term Insurance have all been retired judges, with no connection to any long-term insurance companies. Certain decisions are however made at the level of assistant ombudsman or complaints assessor. Four of the present employees have, as far as I could ascertain, previously worked for insurers. Two of these worked for an insurer that was taken over by another insurer, which resulted in restructuring and relocation of the workforce. All of them have been with OLTI by now for longer than three years. I did not become aware of any close ties or relationships, or any undue favouritism (or aggression) towards any specific insurer. The Code of Ethics for the Ombudsman’s Office provides that all staff members should exercise the powers conferred upon them impartially, without favouring any insurer or complainant (clause 1.2). It is, however, important to be sensitive towards this issue. In future, depending on circumstances, a cooling-off period of anything between six months and two years may be required before any person is appointed to a senior, decision-making position at OLTI.
1.1.6 Only an ombudsman should decide whether any case is within jurisdiction; choose the procedure for resolution of any case; or decide / recommend the outcome of any case. A binding decision or non-binding recommendation by an ombudsman or decision panel is not able to be overturned, or is only able to be overturned by the courts (or a tribunal with equivalent independence and standing). Any decision-maker should disclose any conflict of interest in relation to a case and should cease to be involved in the case unless both parties agree.
In order to place this within its proper perspective, the procedure in dealing with complaints needs to be analysed.
All complaints are received at a single entry point, where they are assessed by a complaints assessor, the data is captured, the complaint is directed to the appropriate insurer and an acknowledgement is sent to the complainant.
Out of jurisdiction cases are directly transferred to the appropriate recognised ombud scheme, with notification to the complainant. At the same time the other ombud scheme is requested to report on progress directly to the complainant, placing some structure into the process.
Where the insurer has not previously had a chance to deal with a complaint which is within the jurisdiction of OLTI, the complaint is first forwarded to the insurer, with the request that the insurer investigates the complaint and advises OLTI of the outcome within a specific time frame.
This is a new system, implemented during the past year, referred to as the Transfer System. From a complainant’s point of view, the system provides a structure to ensure that the complaint is dealt with at an appropriate level and within an appropriate time frame. From the insurer’s point of view, it means that the insurer is granted the opportunity to deal with obvious mistakes, especially systems or processing errors that can be rectified quickly and effectively. At the same time the insurer is billed by OLTI at a reduced tariff if the case is resolved at that stage.
One insurer raised the concern that where for instance a disability claim had already been rejected, there was not much point in transferring the complaint again to the insurer. The concern was expressed that this was not in the complainant’s best interests, as it added an unnecessary time delay to the resolution of the complaint. A slight adjustment to the type of complaint transferred to insurers should address this problem.
Where an insurer has previously dealt with the complaint, a complaint is sent to the insurer to deal directly with the OLTI.
Straightforward cases are dealt with by complaints assessors, who have delegated powers to dispose of such complaints. Formal legal qualifications are not a requirement for the position, but the incumbents all seem to have sufficient appropriate experience, in-house training, and have displayed remarkable insight in the determinations I have randomly chosen to review.
The determinations made by complaints assessors are provisional determinations. Complainants are advised that if they are in possession of additional information not previously disclosed, or if there are new considerations that the complainant would like OLTI to bear in mind, they are invited to bring this to OLTI’s attention on or before a specified date. If no response is received within the prescribed time, it is assumed that the complainant has accepted the provisional determination and the file is closed. If the complainant states that he or she is not satisfied with the outcome, the matter is referred for reallocation to an adjudicator for further evaluation.
More complicated cases are dealt with by any one of eight Assistant Ombudsmen, who also have delegated powers to dispose of complaints and who make provisional determinations. All but two of the Assistant Ombudsmen are legally qualified, highly experienced persons with an enviable depth of knowledge and professional skills. Any Assistant Ombudsman may refer a case to a regular meeting held for an in-depth analysis and discussion of problem cases. At the meeting I attended, every participant was given a substantial amount of reading to prepare beforehand. Only three cases were discussed, but they were discussed in detail and a wide spectrum of opinions was canvassed.
If a complainant is not satisfied with the outcome or provides further information, the complaint is reallocated to a different Assistant Ombudsman for reassessment. If the complainant is still not satisfied, the Ombudsman considers the case personally and where indicated the Ombudsman will grant leave to appeal.
From 1 April 2014 until the end of November 2014, 19 applications for leave to appeal were considered by the Ombudsman. Four applications were granted. Where leave to appeal is granted, the matter is referred to an external appeal tribunal, generally consisting of a retired judge. Of the four instances where leave was granted, one appeal was upheld and one was dismissed. The other two matters had not been finalised.
Approximately 10% of standard and some complicated matters are routinely reviewed by an external reviewer, as part of the quality control process and as an additional safeguard.
Once the process has been completed, complainants may still approach a court of law for relief. Insurers are bound to accept the rulings of the Ombudsman.
It is clear that the system provides complainants with sufficient assistance and safeguards to canvass any complaint in full, without legal assistance and at no cost. This aspect could perhaps be better publicised.
Appointment and terms
1.1.7 The ombudsman should be appointed in a manner which commands public confidence, such as a body with balanced membership – for example:
– one third each from the financial regulator(s), the financial industry and consumer bodies; or
– equal numbers from the financial industry and consumer bodies with an independent chair; or
– a majority of independent members.
The body appointing the ombudsman should not have a majority of industry representatives nor a majority of consumer representatives.
The Ombudsman for Long-term Insurance and his Deputy are appointed by the Council, which is chaired by a judge. Of the other nine Council members, one member represents the financial regulator, two members have ties with long-term insurers, one member is employed by a consumer body, one member is the current ombudsman and the other four members would appear to be independent and not to represent any specific interests.
1.1.8 The ombudsman should be appointed by a transparent process, following a public advertisement, and the appointment should be made on terms that secure his or her independence from the financial industry and consumer bodies; the financial regulator(s) and the government; and those who appointed the ombudsman. The ombudsman should be appointed (or reappointed) for a sufficient term to ensure independence (typically at least five years), and should not be removable – except for incapacity, misconduct or other just cause. Any decision to remove an ombudsman should be in the hands of a body that is independent of the financial industry and independent of consumer bodies.
The position is advertised nationally and the appointment is initially made for three or five years. This term may be extended. The Ombudsman enjoys security of tenure and can only be dismissed by the Council on the grounds of incompetence, gross misconduct or inability to carry out his or her duties, or any other ground recognised as good cause by law.
1.1.9 If the ombudsman can be reappointed, the process should not compromise his or her independence and he or she should be told the outcome at least one year before the previous term ends. The ombudsman’s remuneration should not be subject to reduction or suspension, and should not be influenced by the outcome of cases.
The fact that the ombudsman has traditionally always been a retired judge, who receives an adequate pension, has contributed to the independence of the Office, as this position is not the sole source of income of the incumbent. As mentioned above, the Ombudsman enjoys security of tenure and in particular is not liable for dismissal on the grounds of recommendations or determinations that may be unpopular with insurers or consumer groupings. No incentive bonuses, which could for instance be influenced by the outcome of determinations, are provided for in his contract of appointment.
Staff and resources
1.1.10 The financial ombudsman scheme should be provided with sufficient resources to cope efficiently with its workload. It should operate on a not-for-profit basis.
Although OLTI runs on a tight budget and operates on a not-for-profit basis, the overall impression is that finances are well-managed. Sufficient office space and other resources seem to be available. I did not come across any instances of wastefulness.
1.1.11 The funding structure should be such that those providing the funds (whether from the public sector or private sector) cannot influence the work of the financial ombudsman scheme.
OLTI is a voluntary ombud scheme, financed by long-term insurers who subscribe to the scheme. The subscribers have no influence whatsoever over the operations of the office, the appointment of the ombudsman and his staff, or on the determination of individual cases. Provision is made for his or her independence in Rule 1.2 of the Rules which regulate the relationship between OLTI and subscribers, and between OLTI and complainants.
1.1.12 The financial ombudsman scheme should be able to select and employ its own staff.
OLTI selects and employs its own staff. There is an impressive depth of experience and knowledge amongst staff members, despite the fact that employees have limited career paths. This could possibly in part be explained by the location of the offices (in Cape Town) and the pleasant working conditions. Although there seems to be tight discipline, there is at the same time an open door policy by top management, a willingness to listen to staff problems, empathy towards staff members and their personal circumstances, pride in encouraging staff members to develop their full potential and a genuine wish to serve members of the public in resolving complaints. One staff member has for instance progressed to final year legal studies and another has acquired sufficient formal knowledge to make a substantial contribution to the general maintenance of the computer network.
One of the questions put to respondents during this review, has been about the depth of knowledge and professionalism of staff members. There seems to be consensus that staff members are knowledgeable about long-term insurance issues and professional in handling complaints. In reviewing a selected number of files, no signs of aggression or lack of courtesy towards stakeholders could be found on the side of employees of OLTI, despite some signs of aggression by complainants and by insurers towards complainants.
1.1.13 It may be helpful, but not essential, for the financial ombudsman scheme to have an independent governance body, to appoint decision-makers; help safeguard the independence of the decision-makers; help ensure that the ombudsman scheme has adequate resources to handle its work; oversee the efficiency and effectiveness of the ombudsman scheme; and advise on the strategic direction of the ombudsman scheme.
The Ombudsman’s Council fulfils most of these roles, except that members of the Council are not directly involved in the recruitment and appointment of assistant ombudsmen, who have delegated decision-making powers. This fundamental principle does not imply that the Council should appoint assistant ombudsmen, as they hold delegated powers. The final responsibility for their decisions rests with the Ombudsman.
1.1.14 Any governance body is not involved in deciding cases, nor the day-to-day management of the financial ombudsman scheme. Appointments of members of any governance body are made by a transparent process, following a public advertisement. The members of the governing body should be appointed on terms that require them to act in the public interest and secure their independence from those appointing them. Any member of any governance body should disclose any conflict of interest and cease to be involved in a discussion or decision.
The Council is not involved in deciding cases or the day-to-day management of OLTI. Some consideration could be given to a more transparent process when council members are appointed, including possible public advertisement. Any advertisement should disclose the fact that members of the Council are required to act in the public interest and to act independently.
1.1.15 More publicity about the independence of OLTI could be considered, such as the explanation of the independence of the Banking Scheme given on the website of the Ombudsman for Banking Services, at www.obssa.co.za/index.php/about-us/independence-obs
1.2 Clarity of scope and powers
1.2.1 The financial ombudsman scheme should publish details of the scope of its jurisdiction; its enquiry and case-handling processes; its powers; the status of its decisions; any effect on the complainant’s legal rights of using the ombudsman scheme; and what information is (or is not) kept confidential.
The website ombud.co.za is written from the point of view of OLTI rather than complainants seeking assistance. The fundamental principles set out above could be a useful guideline in rewriting at least the introductory page of the website so as to be more complaint driven.
It does not seem to be general knowledge that long-term insurance refers to life insurance. The first item on the first page could be an explanation that long-term insurance is life insurance, which includes disability cover, funeral policies, credit life insurance, etc. If there is any doubt, complainants could be encouraged to contact the general OMBUD helpline 0860 OMBUDS (0860 662 837), or could be advised that if their complaint does not fall within the jurisdiction of the Office, the complaint will, free of charge, be forwarded to the appropriate agency and the complainant will be advised accordingly.
Although it is mentioned on the website, more prominence can be given to the fact that the scheme is recognised in terms of section 11 of the FSOS Act, that it acts under an independent Council even though it is funded by subscribing insurers; that subscribing insurers are bound by the decisions of OLTI; that compensation orders can be made; that limited awards can be made on the grounds of equity; that the service is free of charge to members of the public; that any complainant can still approach a court of law after exhausting the services of OLTI. The extent of confidentiality, as provided for in the Rules, should also set out.
1.2.2 The financial ombudsman scheme should publish details of its postal address, phone number, email address and website address; the basis of its authority; its decision makers, their method of appointment and term of office; and its membership of any national or international network.
In this regard, it is suggested that the following be added to the existing letter head:
- A statement that the services offered by OLTI are free of charge to members of the public;
- Details of the general Financial Ombudsman Call Centre0860 OMBUDS/0860 662 837;
- The fact that OLTI is recognised by the FSOS Council in terms of section 11 of the Financial Services Ombud Schemes Act, 37 of 2004;
- Membership of the INFO Network (optional).
1.2.3 The financial ombudsman scheme should publish details of the scope of its jurisdiction, including the financial businesses that are covered; the types of services that are covered; whether or not that includes services provided cross-border; whether or not the complainant must be a customer; whether any businesses can complain and, if they can, what types of business; any time limits within which a dispute must be brought to the ombudsman scheme; any minimum or maximum value of disputes that the ombudsman scheme can handle; and any grounds on which the ombudsman scheme may decline to deal with a dispute that is in its jurisdiction.
The guidelines that could be implemented by OLTI relate to
- the fact that there is no maximum value of disputes,
- the maximum amount that could be awarded for inconvenience,
- time limits for the lodging of complaints and
- the grounds on which the ombudsman scheme may decline to deal with a dispute that is in its jurisdiction, as set out in Rule 2.2.
1.2.4 The financial ombudsman scheme should publish details of its enquiry and case-handling processes, including whether the complainant must first complain directly to the long-term insurance company; any requirements on how long-term insurers handle complaints; anything else the complainant must do before referring a dispute to the ombudsman scheme; whether or not the ombudsman scheme handles enquiries; whether or not the ombudsman scheme uses negotiation/conciliation/mediation; whether or not the ombudsman scheme actively investigates cases; the language(s) in which disputes can be submitted and can be handled; and whether or not bringing a dispute to the ombudsman scheme suspends any time limit for taking the dispute to court.
Two of these suggestions that could be implemented by OLTI, are publication of the fact that OLTI goes to a lot of trouble to actively investigate cases and the fact that bringing a dispute to the ombudsman scheme does suspend any time limit for taking the dispute to court.
1.2.5 The financial ombudsman scheme should publish details of its powers, including any power to demand information or documents from either of the parties; the basis on which disputes are decided – for example. fairness/equity; any maximum limit to the amount of compensation it can recommend/award; whether or not compensation is limited to financial loss; whether or not compensation can carry interest until the date it is paid; whether or not costs can be (and, if so, are likely to be) awarded; whether or not a long-term insurer can be required to do anything else to put things right for the complainant; and whether or not the long-term insurer can be required to change its processes.
These guidelines have in general been dealt with elsewhere.
Status of decisions
1.2.6 The financial ombudsman scheme should publish details of the status of its decisions, including whether or not they are published; whether or not they bind the financial business; if binding, how they can be enforced; if non-binding, the percentage of cases in which they are followed by long-term insurers; if non-binding and not followed, whether there are consequences (e.g. publicity); whether or not they bind the complainant; and whether or not there is the possibility of review by, or appeal to, the courts.
The Rules provide that the decisions of OLTI may be published provided the identity of the complainant is not disclosed (rule 3.8) and that the decisions are binding on insurers (rule 3.5), but not on complainants who can still approach a court of law (rule 3.6) or first follow an appeal procedure (rule 6). Insurers may also follow the appeal procedure (rule 6.1).
Confidentiality and Publication
1.2.7 The financial ombudsman scheme should publish details of whether or not the identities of the parties are kept confidential; other information about disputes is kept confidential; and a party can use information from the investigation/decision in subsequent court/arbitration proceedings. There should also be an explanation of whether or not the details are made publicly available on OLTI’s own website and in any other appropriate way.
The identity of complainants is kept confidential as far as is feasible: all documentation is privileged except by order of court or consent of the parties (rule 3.7) and there is publication of an insurer’s identity, but not complainant’s, where a final determination is made against an insurer (rule 3.8). The Ombudsman is also, in general and as a part of his mission statement, bound to maintain confidentiality as far as it is feasible to do so (rule 1.2.5).
The fundamental principle which the financial ombudsman scheme should aspire to comply with, is that financial businesses (in this case long-term insurers) should be required to tell customers about the scheme and the scheme should provide comprehensive information on its own website and in other appropriate ways; be easily available and accessible to complainants (without any cost barrier); communicate clearly; and make appropriate provision for vulnerable complainants.
1.3.1 Long-term insurers are required to advise clients on every policy document of the right to complain to OLTI and to give full contact details of OLTI. This could be extended to include a notification on the insurer’s website, at the point of sale, if the customer makes a complaint and in the insurer’s final written decision on a complaint. The latter should include details of how to contact OLTI and any time limits that apply.
1.3.2 On its own website, the financial ombudsman scheme should show at least the scope of its jurisdiction; its enquiry and case-handling processes; its powers; the status of its decisions; what information is kept confidential, and what may be published; its most recent annual report; any current consultations; and the outcome of any recent consultations.
In general, there is compliance with this requirement. Some suggestions have been made improving the clarity of the information provided on the website.
Other sources of information
1.3.3 The financial ombudsman scheme should ensure that information is also readily available to potential complainants who do not have access to the internet. This may involve making information available through consumer advice organisations; local consumer advice centres; public libraries; local authorities; other places where consumers are used to receiving information; elected representatives; and the media.
Over many years, OLTI seems to have built up a good working relationship with a range of advice organisations and local advice centres.
1.3.4 One staff member, during an interview, suggested that contact details and other basic information be made available on a smallish printed card or in another similar format, for use by staff members when asked about the operation of the Office. She mentioned that for instance during the long taxi ride home to the Transkei, or whilst queuing at a hospital or clinic, she sometimes overheard conversations relating to problems where OLTI could be of assistance. Some literature would be helpful, or business cards with full contact details, made available for all staff members, could be considered.
1.3.5 The financial ombudsman scheme should be easily available and accessible to complainants for submission of disputes online, by post and by telephone. It should also be easily available and accessible to complainants who need face-to-face meetings. Complainants should be able to approach the scheme without having to go through any other person/organisation – save for any requirement to complain first to the financial business.
There seems to be compliance with this requirement. More publicity could be given to the fact that OLTI goes to a lot of trouble to actively investigate cases and that help is available, if needs be telephonically, in most of the official languages. Where assistance is not immediately available, OLTI undertakes to come back to the complainant within a reasonable time, in the appropriate official language.
1.3.6 The financial ombudsman scheme should ensure that all its communications (including its letters and its decisions/recommendations) are in clear and jargon-free language; and makes appropriate provision for consumers who are particularly vulnerable because of disability, age, language, literacy or other reasons.
Whilst reviewing a random selection of recently closed files, I was struck by the clarity of language used in determinations as well as the trouble taken to explain complicated matters as clearly as possible in simple terms, without sounding condescending. This seems to be a part of the general culture of OLTI.
Free for complainants
1.3.7 The services rendered by the financial ombudsman scheme should as far as possible be free-of-charge for complainants.
There is no cost barrier to lodging a complaint with OLTI. More publicity could be given to this.
Access to court
1.3.8 A complainant should have a free choice whether to take a dispute to court instead of the financial ombudsman scheme. No agreement concluded before the dispute materialised requires the complainant to go to the ombudsman scheme instead of the court.
There is compliance with this requirement. Only the complainant can approach a court for relief (rule 3.5 and 3.6). Insurers who subscribe to the scheme are contractually bound to abide by the decision of the Ombudsman for Long-term Insurance (rule 3.5) and cannot decline to give effect to a ruling of OLTI (rule7).
1.4.1 There should be a clear definition of what constitutes a complaint and clear obligations on insurers to deal with complaints fairly and promptly.
1.4.2 A financial ombud scheme should have a flexible and informal process (where parties do not need professional advisers); have skilled decision-makers; and be properly resourced.
Obligations for insurers
1.4.3 What constitutes a complaint should be clear, and documented. For example can it be any oral/written expression of dissatisfaction; or does it have to be a formal complaint in writing?
All complaints must be reduced to writing or electronic form (rule 3.1).
1.4.4 Financial businesses within the financial ombudsman scheme’s jurisdiction are required to have an accessible, effective and fair internal complaints process, which is published; issue a written response to a complaint, with reasons, within a specified time; tell complainants that, if they are still dissatisfied, they can go to the ombudsman scheme; have a single person with overall responsibility for the handling of complaints; respond promptly to communications from the ombudsman scheme; provide information and documents requested by the ombudsman scheme; and comply promptly with the ombudsman scheme’s decisions.
There seems to be greater awareness by insurance companies of the value of having an effective internal complaints process, headed by a single person with overall responsibility for the handling of complaints. This is evidenced by the appointment of internal arbitrators of higher standing and with greater independence. Internal arbitrators are discussed in more detail in par 3 below.
Informal and flexible process
1.4.5 The financial ombudsman scheme should have an informal and flexible process, so that neither party needs a lawyer or adviser (though parties are not prohibited from using a lawyer/adviser if they want to).
Although some complainants are represented by lawyers, most seem to lodge complaints without any formal legal assistance. Not all insurers employ lawyers to deal with complaints internally, and some of the most effective internal complaints handling persons seem to be non-lawyers with a solid insurance background and strong client service skills.
1.4.6 The financial ombudsman scheme should handle enquiries, to resolve some problems before they turn into full-blown disputes; take an active role in deciding what evidence is required and calling for it; obtain expert reports when these are necessary; use informal mediation to reach a fair settlement, where this is possible and appropriate; and issue a formal decision in cases that are not settled.
There seems to be an increasing tendency to try and use informal mediation to reach a fair settlement. One insurer’s representative mentioned a special ability the present Ombudsman seems to have to sit down with the parties, whether in person or by way of conference call, and negotiate a settlement. This view was confirmed subsequently during interviews with other industry representatives.
At the same time, there seems to be a growing culture of trying to be fair to clients, an increased awareness of the importance of equity, and substantive mutual trust and respect between staff members of OLTI and persons dealing with complaints in insurance companies. Insurance companies seem to be working hard on improving their complaints handling / client relationship departments.
OLTI does obtain its own independent expert medical and other advice where necessary.
In complicated matters, comprehensive written determinations are issued. Reasons are also given in standard matters.
Information, advice and training
1.4.7 The financial ombudsman scheme should assist early resolution of complaints by publishing details of its approach to common disputes; giving advice to consumers and insurers; and help train consumer advice centres and insurers’ complaint departments.
Matters of general interest are raised in OLTI’s Annual Report. Extracts from formal determinations are published on OLTI’s website at ombud.co.za Staff members are, as the need arises, sent to insurers for further exposure to long-term insurance and for training, and members of insurers’ complaint departments are encouraged to visit OLTI, meet staff members and familiarise themselves with the working of the Office. Newsletters are published about three times a year and workshops are held for insurers, as the need arises.
Knowledge and skills
1.4.8 The financial ombudsman scheme’s decision-makers should have the necessary knowledge and skills in resolving disputes; have a general understanding of law; have knowledge of relevant financial services; and should be appropriately trained.
There is an impressive depth of knowledge and specialised skill amongst staff members of OLTI. This is apparent from the respect the Office enjoys from members of the long-term insurance industry. This pool of highly-skilled, knowledgeable and effective professionals has been retained over a remarkably long period of time. With professionals, I include support staff, as members of the support staff in general seem to have a professional and passionate approach to their work. Staff turnover seems enviably low.
1.4.9 The financial ombudsman scheme should be adequately staffed; adequately funded; efficient; and cost-effective so that disputes can be effectively and expeditiously investigated and resolved.
Although working on a tight budget, OLTI would appear to be adequately staffed and funded. The Annual Financial Statements of OLTI are not published in the Annual Report of 2013, but total expenditure is.
1.4.10 A comparison with other similar offices makes for interesting reading.
|Ombud Scheme||Type of Scheme||Source||Total revenue R m||Staff expenditure R m|
|OLTI||Voluntary||Annual Report 2013||R16||N/A|
|Credit Ombud||Voluntary||Annual Report 2014||R14||N/A|
|Banking||Voluntary||Annual Report 2013||R22||R14|
|Short-term Insurance||Voluntary||Annual Report 2013||R29||R21|
|Pension Funds Adjudicator||Statutory||Annual Report 2013 – 2014||R42||R28|
|Financial Services Providers||Statutory||Annual Report 2013 – 2014||R28||R20|
1.4.11 During individual interviews, each staff member was asked what additional resources would be helpful in doing their work smarter or faster. Employees seemed to be comfortable with the resources at their disposal. There was some optimism about the improvements to be brought about by the Respond system soon to be implemented.
1.4.12 The only suggestion I have is that a facility to record telephone conversations, especially difficult or rude conversations, directly onto a PC, could be considered.
1.4.13 There seemed to be a remarkable hunger for knowledge amongst members of the support staff. Some of the areas mentioned in which they would like to receive further training or skilling, included the jurisdiction of OLTI and practical training in dealing with the psychological aspects of calming down and dealing with distressed complainants in a professional manner. The need is for practical skills rather than further formal qualifications. Some training for which an attendance certificate is issued should be considered. Training should be given to all persons at the same level, possibly in two sessions so as not to disrupt the functioning of the Office. The possibility of receiving a reduction in INSETA levies to help cover the cost of such training, should be investigated.
Fundamental principles with which financial ombudsman schemes should aspire to comply, is to be prompt, be impartial, proceed fairly and tell the parties in writing its decision and the reasons for it.
Disputes not handled
1.5.1 If a case is outside the jurisdiction of the financial ombudsman scheme, or if it is inappropriate for the ombudsman to deal with it for any other reason, it should promptly tell the complainant of that decision and the reasons for it.
Not only does OLTI advise the complainant if a complaint is outside its jurisdiction, it actively tries to find the correct forum, forwards the full complaint to that forum, and follows up on progress. In this regard, OLTI exceeds international criteria and expectations.
1.5.2 The financial ombudsman scheme should ensure that the complainant and the insurer can put forward their information and arguments; can comment on the other party’s information and arguments; see a copy of any expert statements/opinions obtained by the ombudsman scheme; can comment on any expert statements/opinions obtained by the ombudsman scheme; are told they do not need a lawyer or legal advisor; are told they may seek independent advice or be represented/assisted by a third party; and are notified of the outcome, with reasons, in writing.
There appears to be compliance with this requirement.
Prompt and impartial
1.5.3 The financial ombudsman scheme should deal promptly with all stages of its enquiry and dispute-resolution process; and should reach its decisions impartially.
OLTI deals with all stages of an enquiry promptly and in a disciplined but fair manner. Follow-up is prompt and persistent, to such an extent that at least one respondent highlighted this persistence. If a complainant or an insurer fails or refuses to furnish information requested by OLTI within the period fixed for that purpose, the Ombudsman can proceed on the available information (rule 3.4).
1.5.4 One person employed by an insurer expressed the opinion that insurers should only be given two weeks instead of 22 working days to respond to a complaint. When this view was subsequently put to other insurance representatives, they seemed to agree that this was not a feasible suggestion due to the general complexity of life insurance complaints when compared to personal lines or other short-term insurance. One insurance representative felt that too much leniency was given to complainants where an extension for submission of further evidence was granted without any request by the complainant for such an extension. It was suggested that an extension should only be granted to a complainant upon request.
Accepting a settlement or decision
1.5.5 Before asking the complainant to accept a settlement or a decision, the financial ombudsman scheme should tell the complainant the legal effect (if any) of accepting the settlement or decision and should give the complainant a reasonable time to reflect.
By making preliminary decisions, OLTI grants the parties, especially the complainant, sufficient time to reflect on the decision and if necessary, to submit further evidence.
1.6 Transparency and accountability
Financial ombudsman schemes should pay due regard to the overall public interest in forward-planning and day-to-day operations; consult publicly about their scope, procedures, business plans and budgets; and publish a report at least yearly, explaining the work that they have done.
1.6.1 The financial ombudsman scheme should consult publicly about its initial scope and procedures; any significant changes to its scope and/or procedures; and its business plans and budgets.
Business plans and budgets are submitted to the Ombudsman’s Council for approval and the Ombudsman’s Committee for discussion. The Council represents broader public interests. The Committee consists of fourteen industry representatives. Any change of procedure is only implemented after full discussion with both the Council and the Committee.
1.6.2 The financial ombudsman scheme should publish a report at least yearly, providing information about the disputes it has handled and the way in which it has handled them.
OLTI publishes an Annual Report which is released at an annual event. The report is disseminated to media representatives. The report is also published on its website ombud.co.za.
1.6.3 The report should include details of the numbers and types of disputes that were received; were outside the ombudsman scheme’s jurisdiction; the ombudsman scheme declined to deal with (even though in jurisdiction); were discontinued; were resolved by the ombudsman scheme; were resolved in favour of the complainant; and were resolved in favour of the financial business.
The Annual Report 2013 complies with these requirements.
1.6.5 The report should also include the average time taken to resolve disputes; representative case studies; any systemic or significant problems identified in the financial system; the ombudsman scheme’s governance arrangements; how it preserves the independence of its decision makers; the ombudsman scheme’s arrangements for control of quality; and cooperation with other ombudsman schemes, nationally (where applicable) and internationally.
The Annual Report 2013 complies with these requirements. In addition it contains a supplement with detailed statistical complaints data relating to each subscribing member, mentioned by name. On the back cover, full contact details are given of other voluntary financial ombud schemes, statutory financial ombud schemes, the Financial Services Board, the Public Protector, the National Consumer Commission, ASISA, etc. This is a useful source of reference for persons working in the financial ombud environment.
2. VIEWS OF STAKEHOLDERS
In preparing this review, I interviewed a substantial number of internal arbitrators of insurers, in person or telephonically, as well as a limited number of complainants, Council and Committee members, and staff members of the Financial Services Board. In the interviews, I canvassed issues such as confidence in OLTI, bias and fairness of decisions, consistency of decisions, quality of the dispute resolution service, skills and professionalism of staff members, whether stakeholders feel inhibited in challenging views expressed and determinations made by OLTI, courtesy of staff members and publication of complaints data. I also enquired about the impact of the new Transfer System.
2.1 Confidence in OLTI
2.1.There is an admirably high level of confidence in OLTI by members of the insurance industry. Only one respondent had some reservations, stating that perhaps in twenty percent of cases they didn’t agree with the outcome, but conceded that in possibly 80% of cases they were satisfied that the complaint had been dealt with objectively.
2.1.2 One other respondent expressed reservations, but could not find the time to be interviewed.
2.1.3 In the case of complainants, the level of confidence seemed to correlate directly to the outcome of the complaint.
2.2 Bias and fairness of decisions
2.2.1 A substantial number of respondents, without any hesitation, stated that they had not experienced any bias and that decisions were fair. Upon prodding a bit further, some of the industry representatives felt that sometimes decisions appeared to be biased in favour of complainants, but conceded that on the whole, decisions were fair and unbiased.
2.3 Consistency of decisions
2.3.Although decisions were generally perceived to be consistent, some reservations were expressed in so far as, on similar facts, it had happened that in one case a determination was made on the legal position only, whereas in another case, after the legal finding, the ombud had proceeded to make an equity ruling. The remarkable and probably sincere comment by the internal arbitrator who was interviewed, was that it had not been fair towards the complainant in the first case that the ombud had not proceeded to apply equity.
2.4 Quality of the dispute resolution service
2.4.1 There was general agreement about the good quality of the dispute resolution services rendered by OLTI.
2.4.2 One trend, which was spontaneously mentioned by one respondent and subsequently confirmed by other respondents, was that although there had been great respect for all of the past ombudsmen, the present incumbent had a remarkable ability at conciliation and mediation, and that under his guidance, there had been an increased openness and transparency in dealing with stakeholders. This was greatly welcomed by industry representatives.
2.5 Skills and professionalism of staff members
2.5.1 There seems to be great appreciation for the remarkable depth of skills and the general professionalism of the staff of OLTI. This included not only the Ombudsman and his Deputy, but the rest of the staff as well. One respondent expressed the view that, in comparison to one of the statutory schemes, OLTI was streets ahead in respect of knowledge, service and understanding of issues.
2.6 Whether or not stakeholders felt inhibited in challenging views expressed and determinations made by OLTI
2.6.1 The response to this question differed, but a surprising number of respondents praised the level of openness and communication. It would seem that this openness has increased under the leadership of the present ombud.
2.7 Courtesy of staff members
2.7.1 There were no issues relating to courtesy of staff members, and no hesitancy by respondents in replying to this question.
2.7.2 During a visit of a week to the offices of OLTI, and in reviewing a substantial number of complaint files, I was impressed by the remarkable level of courtesy displayed to all persons, verbally and in writing. In the reviewed cases, I looked carefully for any signs of aggression towards complainants, especially those who had exceeded the normal boundaries of courtesy.
2.7.3 In addition to the remarkable courtesy of staff members, I was also struck by the willingness of staff members to help each other and to help members of the public. If one member of the support staff is unable to take a telephone call promptly, another will automatically take that call. The receptionist is also remarkably prompt in answering incoming telephone calls and knowledgeable in dealing with enquiries. This culture of helpfulness and co-operation, not found all that often in the workplace, is possibly enhanced by the fact that there are no artificial incentive bonuses offered for instance to a fixed percentage of so-called top performers.
2.8 Publication of complaints data
2.8.1 Despite initial reservations about the publication of complaints data, there were no adverse comments by industry representatives about the manner in which this initiative had worked out in practice. More than one respondent took time to explain to me the reason for this general acceptance was that it had been thoroughly thrashed out with industry before the system had been implemented.
2.8.2 One respondent went so far as to suggest that publication of data be done more frequently, possibly every quarter, as it gave client service departments an opportunity to benchmark their performance against the rest of the industry. In particular, the wholly or partially in favour of complainants percentages are deemed to be helpful.
2.9 Transfer system
2.9.1 Another recent innovation has been the so-called transfer system whereby complaints that have not, on the face of it, previously been submitted to the insurer, are first forwarded to the insurer concerned for a chance to resolve the complaint. Despite initial reservations, the system now seems to be generally accepted and a number of respondents praised the system, stating that it was a great improvement and that it worked well. A slight adjustment to the system has been suggested in 1.1.6 above.
INTERNAL ARBITRATOR MODEL
3.1 I was expressly requested to assess the Internal Arbitrator model. Two long-term insurance companies have internal arbitrators who are recognised by OLTI. Where complaints received by OLTI against these insurers have not been dealt with by their respective internal arbitrators, the complaints are first referred to the internal arbitrators for investigation, before being considered by OLTI.
3.2 A substantial number of long-term insurers have employees known as internal arbitrators. The skills levels seem to differ. Not all the internal arbitrators have a legal background. The internal arbitrators have different reporting levels within their organisations. Some report directly to Management, others report to Compliance and Risk.
3.3 The upside of having a strong and independent internal arbitrator, is that the person can negotiate with business units within an organisation, who probably have to consider profit margins rather than customer satisfaction and reputational risk, to resolve a problem or meet a complainant half-way. The simplest way of illustrating this, is by using the example of a manager in a business unit or line function who suggests some leniency or settlement in favour of a complainant. The manager may be perceived as being biased, bribed or unduly influenced for not only considering the company’s interests. A strongly independent arbitrator who is not responsible for bottom line profit, can point out the broader reputational issues and business risks, and try to facilitate some internal settlement.
3.4 When seen in this light, the importance of a strong, independent internal arbitrator becomes apparent.
3.5 Of importance is that an internal arbitrator should be a mature person who understands broader issues, should have the personal backing of the CEO of the organisation, should have a separate contract or compact with management to ensure his or her independence, should report directly to the CEO or executive committee of the organisation and not to an individual member of management (except if it is the CEO).
3.6 Maturity includes professionalism, objectivity and courtesy towards others, as confidence in the functioning and objectivity of the office of the internal arbitrator depends on the confidence exuded by the incumbent and the general respect engendered by this person. In one of the OLTI files reviewed, a so-called internal arbitrator showed an unacceptable level of aggression towards the complainant, showing clear bias towards the interests of his employer. To make matters worse, this decision was subsequently not upheld by OLTI.
3.7 Most of the internal arbitrators interviewed, claimed to be independent and to have management backing. At the same time, not all of them had the confidence to challenge the views expressed by OLTI. There is possibly a direct correlation between the independence, professionalism, status and maturity of an internal arbitrator and his or her willingness to challenge any views expressed by OLTI.
3.8 In summary it can be said that it is to be welcomed that an increasing number of insurers have appointed internal arbitrators, but the success of the office of internal arbitrator will in each instance depend on the independence, maturity and professionalism of the particular incumbent, and the level of respect the incumbent enjoys, internally as well as externally.
PROTECTION OF THE OMBUDSMAN FOR LONG-TERM INSURANCE
4.1 Whilst the requirements of voluntary financial ombud schemes for continued recognition by the Financial Services Ombud Schemes Council in terms of section 11 of the Financial Services Ombud Schemes Act, 37 of 2004 are being increased, some consideration should at the same time be given to increased protection for all such voluntary ombud, possibly similar to the protection given to the Pension Fund Adjudicator by section 30V of the Pension Funds Act, 24 of 1956.
4.2 Section 30V provides for a fine not exceeding R1 million or to imprisonment for a period not exceeding one year, or to both such fine and such imprisonment, for a person found guilty of insulting the Adjudicator; anticipating a determination of the Adjudicator in any manner calculated to influence the determination; wilfully interrupting any proceedings conducted by the Adjudicator or misbehaving in any manner in the place where the proceedings are being held; in connection with a complaintdoes anything which, if done before a court of law, would have constituted contempt of court.
4.3 A similar provision in the FSOS Act, for the protection of recognised voluntary ombudsmen, should be considered.
COMPLIANCE BY OLTI WITH ITS RULES
5.1 The Ombudsman’s Rules, last amended with effect from 27 August 2013, regulate the relationship between the Ombudsman and each subscribing long-term insurer, as well as between the Ombudsman and each complainant who lodges a complaint with OLTI.
5.2 I have been requested to comment on adherence to the Rules, especially by OLTI.
5.3 The main duties of the Ombudsman, in terms of the Rules, relate to his Mission Statement, as well as to ensuring that he does not consider complaints that are beyond his jurisdiction, that only written complaints are considered and that there is general adherence to the procedure as laid down in the Rules. He also has to consider applications for leave to appeal, take the necessary steps should there be any failure to comply with any determination and publish an Annual Report on or before 31 May of each year.
5.4 Duties in terms of Mission Statement
Independence and objectivity
5.4.1 In general, stakeholders who were interviewed were satisfied with the objectivity of decisions by OLTI, although there was a perception by some industry representatives of a possible slight bias in favour of complainants. Similarly, complainants felt a slight bias in favour of insurers, depending on the outcome of their complaint. The fact that both complainants and insurers perceived possible bias in favour of the other party, could indicate the high level of objectivity reached by OLTI.
5.4.2 At the meeting of assistant ombudsmen where difficult questions were being considered, I was struck by the wide range of opinions that were canvassed from colleagues.
5.4.3 Stakeholders, when remarking about a possible slight bias in favour of the opposite party, immediately agreed that it was not suggested that anyone at OLTI could be bribed or unduly influenced.
Informal, fair and cost-effective procedures
5.4.4 The increased use of mediation by OLTI has been welcomed by insurance representatives.
5.4.5 One representative commented on expectations raised by attorneys acting on behalf of complainants, where there was no possibility of a successful complaint, yet complainants were left with an account for legal fees. This could be contained giving more prominence to the fact that the services of OLTI are free to complainants and that complainants are to some extent assisted by OLTI, through requests for further documentation or information.
Balance between interests of complainants and subscribing members and due weight to considerations of equity
5.4.6 As already stated, both complainants and insurers sometimes seemed to perceive a slight bias in favour of the other, indicating the remarkable level of objectivity reached. There was also one comment that, in two similar cases, equity had been followed in the one and not in the other.
5.4.7 In terms of the Rules and in terms of the Code of Ethics, staff members have to maintain confidentiality. I did not find any instances where there had been any breach of confidentiality, or even a suggestion of a possible breach of confidentiality.
Co-operation with FSOS Council in promoting public awareness about financial ombud schemes
5.4.8 As already mentioned, OLTI goes to great lengths, when a complaint is received, to ensure that it is forwarded to the correct ombud and that the complainant is advised accordingly. OLTI also subscribes to the general OMBUD helpline 0860 OMBUDS (0860 662 837). As already suggested, more prominence can be given to this assistance that is available.
Ensuring that subscribing members act with fairness and with due regard to both the letter and the spirit of insurance contracts
5.4.9 The Ombudsman has played an important part in bringing about a change in the mind-set of insurers. This is now being enhanced further by the regulatory initiative to ensure that customers are treated fairly (TCF rules).
I am not aware of any jurisdictional issues at present, although there may have been some issues in the past, especially between different ombud schemes. These seem to have been resolved by agreement between the parties.
5.6. Adherence to procedures
I am not aware of any instances where the Ombudsman has decided, as a matter of practice, to deviate from the agreed procedures, or of any other procedural issues.
5.7 Appeal procedure
5.7.1 A complainant as well as a subscribing member who feels aggrieved by a determination, may apply for leave to appeal against it to a designated Appeal Tribunal (rule 6.1), consisting of one or more members and appointed by the Ombudsman with the consent of the parties concerned (rule 6.4).
5.7.2 Nineteen applications for leave to appeal were considered by the Ombudsman during the period 1 April 2014 until the end of November 2014.
5.7.3 Where leave to appeal is granted, the matter is referred to an external appeal tribunal, usually consisting of a retired judge.
5.7.4 The Ombudsman’s duties include appointment of the member or members of the Appeal Tribunal (rule 6.4); preparation of the record for consideration by the Appeal Tribunal (rule 6.5); and, where the complainant is the appellant, determining the amount of any deposit for costs to be incurred in connection with the Appeal and ensuring that the deposit is paid into an appropriate trust account (rule 6.8).
5.8.1Should an insurer fail or refuse to comply with a determination made by the Ombudsman, the Ombudsman has certain duties to ensure that the determination is enforced (rule 7).
5.8.2 Not all financial ombud schemes have powers to enforce their determinations, especially statutory ombud schemes. This unique feature, which virtually assures enforcement at no cost to the successful complainant, should be given more prominence, on the OLTI website and elsewhere.
5.9 Annual Report
The Ombudsman has a duty to prepare an Annual Report for release on or before 31 May of each year on his or her activities during the previous calendar year (rule 8). The Annual Report for 2014 is in the process of being prepared.
The biggest challenge in undertaking this review has been to find shortcomings in the functioning of an Office that has for many years served as an industry benchmark.
The fact that the Office of the Ombudsman for Long-term Insurance has always been headed by a retired judge, has probably contributed to the general standing of the Office.
Judges are, due to their background and upon making the transition from the Bench to the corporate world, not generally expected to excel instantly as corporate leaders. In this respect, the Ombudsman is assisted by a remarkable management team whose individual contributions in attaining the high standards in the management of the Office, should be acknowledged.
During the investigation I was struck by the respect the Office enjoys, by the culture of professionalism and respect, by the helpfulness and teamwork. There is an enviable enthusiasm for the work they do, despite limited career paths. There is an openness in the management style, but at the same time strict discipline; there is respect and dedication. There is also a continued willingness to adjust and to implement possible improvements.
OLTI complies with and exceeds international standards and expectations for a financial ombud scheme and continues to serve as a benchmark for other financial ombud schemes.