Independent Review Of The Office Of The Ombudsman For Long-Term Insurance 2021
Section 1. Introduction
1. It is the policy of the Council of the Ombudsman for Long-term Insurance (“OLTI”), as part of its governance procedures, to commission a periodic independent review of issues relating to OLTI. I have been asked to do such a review. This constitutes my report.
2. In view of the limitations caused by the Covid-19 pandemic affecting certain activities such as face-to face interviews, this report is largely based on documentation provided to me by the staff of OLTI. Unfortunately, as I write this report in the first quarter of 2021, the Annual Report for 2020 is not yet available. This means that some of my observations are based on the 2018 and 2019 reports. Fortunately, I have experienced nothing but the fullest co-operation by all concerned and in particular by the Ombudsman, Judge Ron McLaren and the Deputy Ombudsman, Ms. Jennifer Preiss in obtaining information.
3. Notwithstanding the practical difficulties faced in the preparation of this report, I have been able to come to conclusions with a high degree of confidence. I am bound to disclose that during my term as Ombudsman for Short-term Insurance from 2012 to 2016, I worked closely with Judge McLaren and Ms. Jennifer Preiss. This has given me an invaluable insight into the inner workings of the OLTI office, an advantage denied to those who authored previous independent reviews. In this regard, I acknowledge having had the benefit of reading those earlier reviews prepared, in 2005 by Professor J.C van der Walt, in 2009 by Advocate Neville Melville and in 2015 by Dr. Elmarie de la Rey.
4. The overall impression is of an institution performing at the highest level of competence, an institution which more than meets the high standards expected of it by the long-term insurance industry, consumer interest groups and the regulator. The reasons for this will become apparent from the comments contained in this report. That the office has attained these high standards should come as no surprise. Since its inception in 1985, successive ombudsmen, all retired High Court (formerly Supreme Court) judges, appear to have built on the success of their predecessors with the support of the Council and all interested parties. Furthermore, OLTI has been a very active participant as member of The International Network of Financial Services Ombudsman Schemes (INFO) which has, as one of its main aims, the improvement of schemes worldwide, formulating a set of Fundamental Principles which if attained, ensures the highest level of competence.
5. As the Scheme has matured over time, it is safe to say that its performance has improved. This is due to several factors, including
· the normal maturation process of learning by experience, taking into account local circumstances;
· the obvious willingness to be open to recommendations such as those by INFO, the World Bank and independent reviewers;
· the increased awareness of OLTI amongst consumers;
· the positive relationship the exists between OLTI and insurers; and
· changes in the statutory environment.
6. The Terms of Reference require me to test the current performance of the OLTI office against, inter alia, the Fundamental Principles published by INFO already referred to. However, the performance will also be tested, where appropriate, against two other demanding standards. The second emanates from a questionnaire prepared by the World Bank which has been commissioned by the South African Treasury to investigate the efficacy of all financial ombud schemes operating in this country. For the record, I have not seen any comments by The World Bank in relation to their investigation. The third standard has its roots in South Africa, namely the KING IV Code of Corporate Governance. Unfortunately, it is impractical to attach either the INFO document, he World Bank questionnaire or the King IV report as Annexures to this report. All three will be referred to in some detail, so that these documents not being attached as annexures should not cause the reader much inconvenience. However, I have attached as Annexures “’A’’ and “B” respectively, the constitutions of the Association and the Council as these documents are particularly relevant to in this report.
I am also mandated to make recommendations for improvement. In doing so, I have attempted to meet the principles highlighted by INFO, the World Bank and the King IV report.
7. A brief reference should be made to the statutory environment which currently prevails in relation to voluntary ombud schemes such as OLTI.
7.1 At the inception of OLTI in 1985 as a creature established, to its credit, by the Long-term Insurance Industry itself, there were no statutory provisions governing its activities. This changed when the Financial Services Ombud Schemes Act No. 37 of 2004 (“the FSOS Act”) and the Policyholder Protection Rules were promulgated in terms of the Long-term Insurance Act, No. 52 of 1998.
7.2 In 2012 the South African Treasury announced that it was to investigate the strengthening of financial services ombud schemes to afford the authorities increased powers of oversight and control. After many years of consultations with all interested parties, the Financial Sector Regulation Act No. 9 of 2017 was approved by the South African legislature. Chapter 14 of this Act deals with ombud schemes and became effective on the 1st November 2020.
7.3 However, the FSOS Act, theoretically, remains in force until the 30th May 2021 but the FSOS Council, established in terms of the FSOS Act, was disbanded some time ago. The consequence is statutory uncertainty in that until the Ombud Council, a body envisaged in the 2017 Act becomes functional, there will remain a statutory hiatus. The Constitutional Documents and the Rules were approved by the now-defunct FSOS Council. However, as the FSOS Council no longer exists, the Constitutional Documents and the Rules are incapable of amendment under the FSOS Act. However, as Chapter 14 of the 2017 has now been promulgated, it means that any proposed amendments must henceforth be approved by the new Ombud Council. The 2017 Act introduces significant changes into the Ombud’s landscape with material levels of control and oversight vested in the Ombud Council. It is thus conceivable that changes to the OLTI Rules, emanating from the Ombud Council, will occur. However, this is pure speculation. For the record, there has, to date, been no official notice of the appointment of the members of the Ombud Council.
8. Notwithstanding this uncertainty, OLTI has continued to operate effectively. In anticipation of the eventual introduction of the 2017 Act and all its organs, OLTI has embarked on a partial merger with the office of the Ombudsman for Short-term Insurance, to the extent possible under prevailing legislation and under the current Constitutional Documents and Rules. One of the consequences is that Judge McLaren is now the Ombudsman for Long-term Insurance and, since the 1st January 2020, also the Ombudsman for Short-term Insurance.
9.1 “Association “means the Long-term Insurance Ombudsman’s Association.
9.2 “Association’s Constitution” means the Constitution of the Long-term Insurance Ombudsman’s Association adopted in May 2005 as amended in October 2007;
9.3 “Council’s Constitution “’ means the Constitution of the Ombudsman’s Council, as amended in September 2010.
9.4 “Constitutional Documents “means the Constitution of the Long-term Insurance Ombudsman’s Association and the Constitution of the Ombudsman’s Council.
9.5 “FSOS Act” means The Financial Services Ombud Schemes Act No.37 of 2004.
9.6 ‘’FSOS Council” means the Council established in terms of the FSOS ACT.
9.7 “INFO” means The International Network of Financial Services Ombudsman Schemes
9.8 “new Act” or “the 2017 Act”’ means the Financial Sector Regulation Act No.9 of 2017.
9.9 “OLTI” means The Ombudsman for Long-term Insurance.
9.10 “OSTI” means The Ombudsman for Short-term Insurance.
9.11 “Policyholder Protection Rules” means the Rules published on the 15th December 2017 and subsequently amended on 28 September 2018 in terms of The Long-term Insurance Act No.52 of 1998.
10.1 Annexure “A’’ : The Association’s Constitution
10.2 Annexure “B” : The Council’s Constitution.
Section 2. Terms of Reference
The Terms of Reference which form the basis of this review read as follows:
· Review of Rules and Constitutional Documents
· Review of Corporate Governance Structures and Practice
· Review of Compliance with INFO Fundamental Principles
– Accessibility for consumers
– Independence to ensure impartiality
– Fairness – both in procedures and outcomes
– Accountability and Transparency
· Recommendations for improvement.
Section 3. Review of Constitutional Documents and Rules
1. A review of the Constitutional Documents (see Annexures “A” and “B”) and the Rules inevitably touches upon governance issues. As a result, there may, in this Section 3, be some overlap with the review of Corporate Governance Structures and Practice in Section 4 below.
2. The Constitutional Documents consist of the following, namely,
(a) the Association’s Constitution; and
(b) the Council’s Constitution.
I recommend that these documents be completely re-drafted for the reasons more fully set out below.
3. There are two separate organs of the Association, namely the Council and the Committee. The Council has its own constitution. However, the Committee has no constitution and its functions and powers, in relation to OLTI, are contained in the Constitutional Documents.
4. OLTI’s Rules, last amended with effect from the 30th June 2016, are published in the Annual Report of the Ombudsman and on the OLTI website. The Rules refer to
· the Mission Statement
· the jurisdiction of the Ombudsman
· the procedures relating to the resolution of disputes
· issues relating to prescription
· appeals from a ruling of the Ombudsman
· the rules relating to enforcement of rulings and
· the Ombudsman’s Annual Report.
The Association’s Constitution
5. The legal persona that is the Association takes the form of a Voluntary Association as distinct from a Non-profit Company or a Non-profit Trust. Although the scheme was established on the 1st January 1985, the Association appears to have been established only in 2007.
6. A minor technical drafting defect in the Association’s Constitution arises when comparing Clauses 1.2 and 1.5 on the one hand and Clauses 1.3 and 8.3 on the other. In Clauses 1.2 and 1.5 it is stated that the mission of OLTI is to “mediate” disputes whereas in Clauses 1.3 and 8.3 there are references to “rulings”. Again, nothing much turns on this as it is apparent from the Rules, the practice of OLTI and the acceptance thereof by the industry, that the Ombud does in fact have the power to make rulings. A ruling binds an insurer but not a complainant, unless the latter accepts such a ruling.
7. I would also draw attention to Clause 1.2 of the Association’s Constitution which empowers the Ombudsman to “advise “on any complaint. However, OLTI does not furnish advice to either insurers or consumers. I recommend that when opportune, the document be amended appropriately.
8. Clause 1.4 of the constitution provides that the Ombudsman “reports to” two bodies, namely the Council and the Committee. This is contrary to sound management principles. The Ombudsman should have to report only to the Council. Furthermore, the phrase “reports to” suggests that the Ombudsman is in a position below that of both the Council and of the Committee. While it is so that the Ombudsman is accountable to the Council, he should not be accountable to the Committee. I recommend that the clause be amended.
9. Clause 1.7 addresses the functions of the Ombudsman’s Committee. Its primary concern is stated to be “the efficient operations of the Ombudsman’s office”. Thereafter Clauses 1.7.1.to 1.7.4 set out four specific functions. (See Annexure “A” attached). However, the Committee should not, in my respectful opinion, have, or even be seen to have, the power to involve itself with the day-to-day operations of the office, as is suggested by the wording quoted above. (See the introductory words to Clause 1.7 of the Association’s Constitution).
10. It is noted that the constitution makes mention of “the Members” of the Association. (See paragraph 7 of the Constitution).
10.1 The Members, as a committee, do not play any active role in the day-to-day affairs of the organisation, although there is a requirement that the Members meet not less than twice per calendar year (See Clause 10.1 of Association’s Constitution). The purpose is to receive and consider resolutions of the Council and the Committee and to consider any other matter relating to the Association (See paragraph 10.1 and 10.3 of the Constitution).
10.2 On a very minor issue, it is prescribed in paragraph 10.1 that meetings of Members should follow upon meetings of the Council and the Committee. However, this is currently not the practice. In answer to a question from me, the Deputy Ombudsman explained that meetings of Members have, for some time, been held after the Committee meeting but before the Council meeting. There appears to be no harm in doing so, but the practice is not, strictly speaking, in compliance with Association’s Constitution. I accordingly recommend an amendment to the constitution, to align it with what actually happens in practice.
11. In terms of clause 14.1 of the Association’s Constitution, the Committee, in effect, has the power to veto the re-constitution and/or dissolution of the Association. I recommend that any veto power given to the Committee should be revoked in order to ensure the independence of the Association.
The Council’s Constitution
12. The Council’s Constitution is a brief, four-page document setting out, inter alia, the mandate and responsibilities of the Council. It is the apex organ of the Association and is designed to act in consultation with the Committee in regard to the issues set out in paragraphs 1.1 and 1.3. This is covered in the concluding words of Clause 1 of the Council’s Constitution:
“The powers set out in paragraphs 1.1 and 1.3 above will be exercised by the Council after consultation with the Ombudsman’s Committee.”
Sub-clauses 1.1 and 1.3 deal with the appointment of the Ombudsman and changes to the Rules and policy guidelines governing the
Ombudsman’s powers. I will have more to say about the Ombudsman’s Committee and its stated powers below.
13. The composition of the Council is dealt with at Clause 2. The document received from the Ombudsman’s office bears the date September 2010 which I must assume is the latest draft of this document. It is clearly out of date as it records as members, individuals who have long ceased to serve. The document should be amended, inter alia, by not referring to the names of Council members as these are bound to change at regular intervals, thereby automatically rendering the document obsolete.
14. Further in relation to Clause 2 dealing with the composition of the Council, it is not readily apparent how appointments are made. Only in Clause 2.4 is there a passing reference to the fact that
“The Council may appoint one or more members of the Council provided that the total number of members shall not exceed Eleven (11) “.
14.1 It is clear that new appointments are made by serving members of the Council. There is no requirement for vacancies to be advertised. I recommend that consideration be given to amending the Constitution to record more precisely what process should be followed in the appointment of new members. This should include a requirement that vacancies, other than in respect of ex-officio appointments, be made in a transparent manner after a public advertisement. This would be in compliance with World Bank requirements. (See 3a) (312) of the World Bank questionnaire.) In the 2015 review by Dr. Elmarie de la Rey it was stated that
“Some consideration should be given to a more transparent process when Council members are appointed, including possible public advertisement.“
OLTI’s written response was that it agreed to this suggestion.
14.2 The two latest appointments have been made after the vacancies were advertised only on OLTI’s website. While this may constitute a public advertisement, it is the bare minimum to pass muster. I would recommend that in future an advertisement be placed, in addition to the website, in a newspaper with wide circulation, at least in the Cape Town area.
15. There are further amendments that I recommend arising out of the World Bank questionnaire. All references which are in brackets refer to the paragraph number in the World Bank questionnaire. The recommended amendments are that:
· No politician may be appointed to the Council (para. 313) ;
· No serving financial regulator may be appointed (para.314) ;
· No person that is associated with the industry may be appointed as Chairperson (para 316);
· Persons associated with the industry may not form a majority of the Council (para.317);
· No member may be removed by any body other than the Council and then only on good grounds, including, but not limited to incapacity or misconduct (para.321);
· Members should be obliged to act in the public interest (para.322);
· Members should be obliged to disclose any conflict of interest and not be involved in any connected discussion/decision (para.323); and
· The Ombud and Deputy Ombud should be appointed by a transparent process following a public advertisement (para. 326).
16. The Council’s Constitution also addresses the powers of the Committee. In Clause 8 the Committee is given an effective veto to prevent the amendment of the Council’s Constitution and the mandate of the Ombudsman. This veto right should also be revoked as it detracts from the independence of the scheme.
17. The powers and functions of the Committee are not conveniently contained in one document. Two documents have to be referred to, namely the respective constitutions of the Association and of the Council. I recommend that there should be one consolidated, well drafted document, being the constitution of the Association, which deals with both of its subsidiary organs , namely the Council and the Committee. I have not attempted to do such a re-draft as it falls outside of the Terms of Reference. However, I have elsewhere made suggestions for amendments to a limited number of particularly important clauses in the Constitutional Documents.
18. However, in view of the possible merger of OLTI and OSTI, such a re-draft in the immediate future may be a waste of resources. The merger will give rise to complex issues and will almost inevitably require a complete re-draft of all founding documentation, including that of the entity that will be the vehicle that houses the merged entity. I recommend that if this is not already done, outside independent professional advice be sought in the near future to begin the process, which should include the alignment of the new founding documents with the requirements of Chapter 14 of the 2017 Act.
19. At the Council meeting held on the 29th May 2020 a member queried whether virtual meetings are authorised by the Council’s constitution.
19.1 the Constitution, at paragraph 5, provides, inter alia, that
“The business of the Council shall be conducted in accordance with such procedures as may be determined by the Chairperson on the basis that ……..…..”
This seems to give the Chairperson a wide discretion in regard to how the business of the Council, including meetings, is to be conducted.
19.2 Furthermore, decisions can be taken by way of a round-robin resolution. This indicates that a decision can be taken when Council members are not physically present at the same time as at a conventional meeting.
19.3 For these reasons I am of the view that there is no need to amend the Council’s constitution to cater for virtual meetings.
20. The Committee is a useful creature, but one which currently can prowl too widely, at least on paper. Its powers and functions, as recorded in the Constitutional Documents, here and there reflect a by-gone era. However, the Committee in practice, makes a meaningful and constructive contribution to the success of the office. In fact, it plays a critical role which is acknowledged by all. My concerns about the Committee, such as they are, arise from some of the wording in the Constitutional Documents, and not from what happens in practice.
21. It should be borne in mind that the Chairperson of the Committee is a member of the Council in an ex-officio capacity, can be party to any decisions taken by that body and can convey the industry’s views in that forum. Nevertheless, currently the Committee has the right to be consulted on several important issues. However, this right potentially brings with it the power to influence the outcome of whatever it is being consulted on. I therefore recommend that the Committee’s rights to be consulted on particular issues should be reconsidered.
22. In order to eliminate any doubt about what the role of the Committee should be, I recommend, inter alia, an amendment to Clause 1.7 of The Association’s Constitution. I have elsewhere recommended a complete re-draft of the Constitutional Documents, so the wording I now suggest can perhaps be considered for use when and if such a re-draft is effected. The suggested wording reflects what currently happens in practice and will, I trust, be welcomed by the World Bank, the Treasury and the new Ombud Council. It changes the emphasis from the Committee having rights and powers, to it being merely a liaison and consultative body . I suggest the following wording:
“1.7 The Committee acts only as a liaison and consultative body to the Association and the Council and in so doing communicates the industry’s views on any issue relating to the Association including, but not limited to,
1.7.1 appropriate mechanisms for financing the Ombudsman’s operational costs;
1.7.2 the service rendered by the Ombudsman’s office;
1.7.3 any operational issues relating to the Ombudsman’s office;
1.7.4 any proposed change to the Rules;
1.7.5 any legislative or regulatory change affecting the Ombudsman;
1.7.6 any extension or limitation of the jurisdiction of the Ombudsman; and
1.7.7 the Ombudsman’s annual report. “
23. It will be noted that I recommend deletion of those existing sub-clauses of 1.7.4 which provide that the Committee acts as a consultative body to the Council in respect of
23.1 the appointment of the Ombudsman; and
23.2 the terms of his appointment and of senior staff.
The reason for the recommendation is to fortify the independence of the Ombudsman, the Association and the Council, actual and/or perceived, from the industry.
24. I have already alluded to what amounts to a veto given to the Committee in Clause 14 of the Association’s Constitution and that it should be revoked. I mention it again while dealing with the powers of the Committee under this heading purely for the sake of completeness. Clause 14.1 reads as follows :
“ 14.1 The Association may be re-constituted or dissolved by resolution of the members, duly approved by both the Council and the Committee; or by any cause recognised by law for its dissolution.” (My underlining).
25. Clause 8 of the Council’s Constitution, headed ” Amendment or Disestablishment “, also addresses the role and powers of the Committee. Its provisions need to be amended as again, it effectively gives the Committee a veto. Again, I repeat this under this heading purely for the sake of completeness. Clause 8 reads as follows;
“8. This constituting document, including the mandate of the Ombudsman’s Council, may be amended, the name may be changed, and the Council may be disestablished at any time, by Resolution of the Council, provided that such Resolution is supported by no less than Two-thirds of its Members at the relevant time, being not less than the minimum number stipulated above; and provided that any such Resolution must also be approved by Resolution supported by a majority of the Ombudsman’s Committee. “ (My underlining)
26. At the risk of repetition, these are the powers of the Committee that I recommend need to be reviewed, namely:
26.1 the right to call upon the Ombudsman to report to it; (See Clause 1.4 of the Association’s Constitution);
26.2 the right to involve itself with the day-to-day operations of the office (See the introductory words to clause 1.7 of the Association’s Constitution) ;
26.3 the right to be consulted on the appointment of the Ombudsman and the terms of his/her appointment; (See clauses 1.6.1 and 1.7.4 of the Association’s Constitution and clause 1.1 of the Council’s Constitution) ;
26.4 the power to veto the re-constitution and/or dissolution of the Association (see clause 14 of the Association’s Constitution) and any amendment to the Council’s Constitution, including the mandate of and the disestablishment of the Council (See clause 8 of the Council’s Constitution).
27. The Rules form an important component in defining, amongst other things, the relationship of OLTI with subscribing members of the industry. The Rules should be read in conjunction with the Constitutional Documents. The Rules put beyond doubt that the Ombudsman is empowered to resolve complaints through mediation, conciliation, recommendation or determination.
28. The Rules, read in conjunction with the Constitutional Documents, ensure, with a few minor exceptions referred to in Section 5 below, compliance with the six Fundamental Principles espoused by INFO, namely
· Scope and powers
· Transparency and Accountability
29. However, nowhere in the Rules is there a definition of what constitutes a “complaint”. The closest that the Rules come to providing any guidance on this issue is in Rule 3.1 which provides that complaints (undefined) shall be reduced to writing. Both INFO and the World Bank seem to place much importance on defining what constitutes a complaint. Be that as it may, I recommend that consideration be given to amending the Rules to provide for an appropriate definition.
29.1 Such definition could be that contained in Section 18.1 of the Policyholder Protection Rules or that contained in the proposed Conduct of Financial Institutions Bill.
29.1.1 The Policyholder Protection Rules define a complaint as:
“an expression of dissatisfaction by a person to an insurer or, to the knowledge of the insurer, to the insurer’s service provider relating to a policy or service provided or offered by that insurer which indicates or alleges, regardless of whether such an expression of dissatisfaction is submitted together with or in relation to a policyholder query, that –
(a) the insurer or its service provider has contravened or failed to comply with an agreement, a law, a rule, or code of conduct which is binding on the insurer or to which it subscribes;
(b) the insurer or its service provider’s maladministration or willful or negligent action or failure to act, has caused the person harm, prejudice, distress or substantial inconvenience; or
(c) the insurer or its service provider has treated the person unfairly.”
29.1.2 The Conduct of Financial Institutions Draft Bill defines a “complaint” as
“an expression of dissatisfaction by a person to a financial institution or, to the knowledge of the financial institution, to the financial institution’s service provider relating to a financial product or financial service provided or offered by that financial institution, which indicates or alleges, regardless of whether the expression of dissatisfaction is submitted together with or in relation to a query by a financial customer, that—
(b) the financial institution’s or its service provider’s maladministration or wilful or negligent action or failure to act, has caused the person harm, prejudice, distress or substantial inconvenience; or
(c) the financial institution or its service provider has treated the person unfairly;”
This may be the definition preferred by the World bank as it is referred to by it at paragraph 243 of its questionnaire.
30. I also recommend that the Rules should be amended to oblige insurers to publicise the existence and role of OLTI. I make this recommendation purely to comply with INFO and World Bank standards. It is acknowledged that insurers have for years publicised the existence of OLTI.
31. In my opinion the current Rules adequately prescribe the objectives, powers and procedures of OLTI. This will become more apparent when these Rules are tested against the stringent requirements of INFO, an exercise which I deal with below in Section 5.
Section 4. Review of Corporate Governance Structures and Practice
Corporate Governance Structures
1. The structures consist of
· The Association;
· The Members of the Association;
· The Council;
· The Committee;
· The Audit and Risk Committee; and
· The Ombudsman
2. The Constitutional Documents have been dealt with above in Section 3. As already stated, the Committee does not have its own constitution. There are also no constitutional documents for the Audit and Risk Committee.
3. The roles of each of the structures are to be found in the following documents:
· The role of Members is set out in the Association’s Constitution.
· The role of the Committee is set out not only in the Association’s Constitution, but also the Council’s Constitution.
· The role of the Audit and Risk Committee is determined by The Council. However, an important role is the oversight of corporate governance as delegated to this Committee by a resolution of the Council at its meeting on the 10th May 2019.
· The role of the Ombudsman is set out in the Association’s Constitution and in the Rules.
4. All the aforesaid structures play an important role and appear to be effective. However, one issue should be raised for the consideration of the Council. It relates to the possible establishment of an Executive Committee of the Council with clearly defined powers.
4.1 An Executive Committee is a common feature of corporate structures. As the Council meets only twice a year, it is probable that important matters will require urgent attention on an interim basis at Council level. Such matters could effectively be dealt with by a small sub-committee of the Council, named the Executive Committee or Exco, in preference to a cumbersome procedure involving all ten members of the Council by way of, for example, a round-robin resolution. My recommendation is that consideration be given to the establishment of such a body. The Council’s Constitution at paragraph 5.8 already provides for such a sub-committee. Paragraph 5.8 reads as follows:
“5.8 The Council may delegate such of its powers and prerogatives as it may deem appropriate to one or more of its members, or to a specially constituted sub-committee. The member or sub-committee to whom such delegation is made, shall conform to any stipulations or procedures that may be determined by the Council from time to time.”
4.2 Issues that could be dealt with by Exco include the following:
· Review the annual budget prior to presentation to the Council;
· Review periodically the organisation’s structures and make recommendations;
· Review succession plans and make recommendations;
· Review applications for the positions of Ombudsman and Deputy Ombudsman and make recommendations;
· To do an annual performance appraisal of the Ombudsman and the Deputy Ombudsman;
· Review and recommend to the Council the remuneration of all staff;
· To monitor the organisation’s activities, having regard to current legislation in respect of social and economic development such as the BBBEE Act and the Employment Equity Act;
· To deal with any ad hoc matter referred to Exco by the Council.
Corporate Governance Practice
1. No review of corporate governance in South Africa would be complete without referring to the King IV report published under the auspices of The Institute of Directors in Southern Africa NPC. It sets the benchmark for ethical and practical standards that should be met by various institutions, including non-profit organisations such as OLTI. The Council clearly attaches great importance to the principles set out in King IV.
2. King IV identifies sixteen principles of good governance, all of which are directed at the Council as the governing body of OLTI. The sixteen principles are:
· Principle 1: The governing body should lead ethically and effectively.
· Principle 2: The governing body should govern the ethics of the organisation in a way which supports the establishment of an ethical culture.
· Principle 3: The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen.
· Principle 4: The governing body should appreciate that the organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.
· Principle 5: The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation’s performance and its short, medium and long-term prospects.
· Principle 6: The governing body should serve as the focal point and custodian of corporate governance in the organisation.
· Principle 7: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity, and independence for it to discharge its governance role and responsibilities objectively and effectively.
· Principle 8: The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties.
· Principle 9: The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness.
· Principle 10: The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities.
· Principle 11: The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives.
· Principle 12; The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives.
· Principle 13: The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen.
· Principle 14: The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short medium and long term.
· Principle 15: The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation’s external reports.
· Principle 16: In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time.
3. It has already been noted that all of the sixteen principles are directed at the governing body i.e. the Council. Its onerous responsibilities demand that those serving on the Council are aware of the sixteen principles and what is expected of them.
4. Having read the minutes of the meetings of the Council for the years 2019 and 2020, it is clear that the Council puts into practice the principles enunciated in King IV, as is evidenced by the absence of any suggestion of poor corporate governance from any source. The Chairperson, in her Foreword in the Annual Reports for 2018 and 2019, stresses the importance of King IV and reports that a permanent item for Council meetings is “corporate governance”. Accordingly, there is no reason to have any concerns about compliance with governance principles. The following merely serve as examples which further support this conclusion.
5. There exists an Audit and Risk Committee which has produced a written Risk Register which identifies, under various categories, the risks that should be managed. This document analyses various risks by
· Risk Categories: Human Resources; Strategic; Operational; Finance and Compliance.
· A description of the risk e.g. Covid -19; Changed Ombudsman’s structure; Ability to resolve complaints; Transparency / Accuracy; and Compliance with laws and regulations.
6. An annual audit by external auditors (currently Mazars) is conducted with a clean audit report being taken for granted. Mazars report that they are satisfied with all control measures. However, I recommend that consideration be given to the rotation of auditors every five years as recommended by The South African Institute of Chartered Accountants. This comment is not to be interpreted in any way as a criticism of any individual or of Mazars, whose performance has been positively commented upon by OLTI staff.
7. There exists a formal, written Code of Ethics. This is an impressive document setting out in considerable detail what is expected of all staff. There exists an Ethics Committee, chaired by the Ombudsman, which deals with any breaches should they occur.
8. The office does not currently employ internal auditors to review and advise on compliance of any internal procedures or issues. I would recommend that the office consider consulting a reputable firm to determine what services are available and thereafter to consider whether it will be worthwhile to make use of such services.
8.1 The functions could include, but need not be limited to, the identification of the organisation’s risks, governance and legislative requirements, operational issues including financial reporting, fraud, and internal processes. The internal auditors should liaise closely with the external auditors to avoid duplication of audit effort and to facilitate the sharing of audit plans and working papers.
8.2 However, OLTI should guard against what I call “over-governance”. There comes a point when the Ombudsman and Deputy Ombudsman become so inundated with governance issues that it may have a negative effect if attention is unnecessarily diverted from the core function, namely dispute resolution.
9. While there is no reason to have any concerns about corporate governance, I am taking the liberty, purely for the sake of completeness, to draw attention to the Non-profit Organisations Act 71 of 1997 that has application to voluntary organisations such as OLTI. In terms of this Act, provision is made for a voluntary registration process. I will not attempt to summarise all aspects of this Act, but merely record the benefits of registration as set out in a useful document titled “A concise guide to The Nonprofit Organisations Act 71 of 1997” published by Inyathelo-The South African Institute for Advancement, Cape Town (Telephone number 021-465-6981). I quote from the document:
“Although registration is voluntary, the Act provides an organisation the opportunity to be formally recognised as a legitimate and accountable organisation. Registration increases the organisation’s:
These are critical ingredients for creating an investment climate in the organisation. Without legitimacy and accountability, it is difficult to garner the resources required for the organisation to conduct its work. Organisational beneficiaries, partners and prospective donors will support an organisation if they trust and are confident in the manner in which it conducts business. If an organisation is registered and adheres to its legal obligations, it is more likely to attract the external support required to advance its objectives.”
I commend the office for having registered as a non-profit organisation in terms of this legislation as far back as 2005.
10. The Council is the ultimate controlling body and its own performance should be evaluated from time to time. This is referred to in the King IV report at Principle 9 thereof. For sake of convenience, I repeat the wording here:
“Principle 9: The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness. “
10.1 As the Council meets only twice a year, the importance of having the focused involvement of each Council member becomes critical. An agenda and board packs are distributed timeously before every meeting. Proper minutes are kept. I have no way of assessing the contributions made by each member individually. However, in terms of the King IV report, a process of self-evaluation at the highest level is advisable.
10.2 At its meeting on the 10th May 2019, the issue of self-evaluation was in fact addressed. A procedure was agreed. However there have not been any further developments in this regard. I would recommend that the Council takes advice, perhaps from The Institute of Directors or its auditors, how and by who such an evaluation process should be implemented.
Section 5. Review of Compliance with INFO
1. In September 2014 The International Network of Financial Services Ombudsman Schemes (“INFO”) published a comprehensive document titled “ Effective Approaches To Fundamental Principles”. The document describes six Fundamental Principles to which INFO members should aspire and effective approaches that help to meet those Fundamental Principles. Note that the document uses the word “describe “and not “prescribe”’. This is important, as INFO recognises that there are many differences between schemes, operating in numerous countries, each having their own priorities and cultural practices. The guide does not set compulsory standards for members. It is merely intended to assist INFO members. The six Fundamental Principles are:
· Scope and powers
· Transparency and Accountability.
2. The INFO principles have been widely accepted and have become the benchmark to which all schemes worldwide should aspire. What follows analyses the extent to which OLTI achieves those aspirations. I believe that OLTI’s performance reflects a world class operation. The reason for this conclusion will be appreciated after OLTI’s performance, tested against the INFO principles, has been considered below.
3. In this Section 5, I have taken the liberty of using, and acknowledge the assistance given to me by, the wording of the INFO document that contains the Fundamental Principles, and of the questionnaire circulated by the World Bank during 2020 as part of its diagnostic review of the current Financial Ombud’s System in South Africa.
Independence to ensure impartiality
INFO Fundamental Principle
· Financial ombudsman schemes are an alternative to the courts. They should be (and also be seen to be) independent and impartial – resolving cases on their merits, without fear or favour.
· Financial ombudsman schemes should be established so that they are visibly and demonstrably independent of both the financial industry and consumer bodies.
· Decision – makers should be free from influence/direction – including free from influence/ direction by:
o Parties to disputes (and those representing them); and
o Regulators and governments.
4. OLTI is governed by an independent Ombudsman’s Council which, inter alia, assists in safeguarding the independence of decision makers. The Council is not involved in deciding cases nor in the day – to – day management of the scheme. The Council has a balanced membership, the majority of its members being independent. Ex-officio members represent the industry and the regulator. The Ombudsman is also an ex-officio member.
5. The independence of OLTI was and remains established in terms of its Association’s constitution which was approved by the now defunct FSOS Council. The parties to disputes are not in a position to exert any commercial or other influence over the financial ombudsman scheme, directly nor indirectly. The scheme is free to, and does, publish reports on its work and on issues that give rise to complaints.
6. Case decisions are made by an ombudsman who has not worked in the industry for over five years. In fact, the current Ombudsman, as a retired judge has never worked in the industry. Only the Ombudsman or a decision panel can decide whether any case is within its jurisdiction, can choose the procedure for the resolution of any case and decide the outcome of any case. A binding decision by the Ombudsman or decision panel is not able to be overturned, except by a court on the very narrow grounds afforded by review proceedings, but not through an appeal on the merits. However, the scheme itself has an appeals procedure as set out in Section 6 of the Rules. Although not specifically provided for in the Rules, any decision maker must disclose any conflict of interest in relation to a case and ceases to be further involved unless both parties agree. I recommend that an appropriate amendment to the Rules be made to cover this.
7. The Ombudsman and Deputy Ombudsman are appointed by the Ombudsman’s Council. The Ombudsman’s Council does not have a majority of industry representatives nor a majority of consumer representatives. Appointments of decision-makers are made through a reasonably transparent process, following a public advertisement. The enabling legislation, namely the FSOS Act 2004 and the new 2017 Act, guarantees the independence of the Ombudsman. Furthermore, the Ombudsman is appointed for at least five years and is not removable except for incapacity, misconduct or any other just cause.
8. The scheme operates on a non-profit basis and is able to employ its own staff. OLTI is sufficiently resourced at present to cope efficiently with its high workload. It is a lean organisation with no surplus capacity. However, in terms of section 211 (3) of the new 2017 Act, it will be obligatory, and not merely voluntary, for all long-term insurers to belong to the scheme in due course. This will inevitably bring with it an increase in the workload, probably necessitating additional resources. I therefore recommend, if this has not already been done, that an analysis be made immediately of the impact of the new legislation on future workloads and therefore of the resources which will be needed .
9. The Association’s Constitution does not specifically refer to the following, often minor, technical issues raised by the World Bank questionnaire under its “Section 3: Independence”. Nevertheless, I recommend that these be addressed through appropriate amendments to the Association’s Constitution, although most of the World Bank’s points are already implemented by OLTI in practice. The recommended technical amendments should provide:
· that no serving politician be allowed to serve on the Council;
· that no financial regulators, meaning no member of the Ombud Council or the Chief Ombud to be appointed in terms of the 2017 Act, be allowed to serve on the Council;
· that all members of the Council are to be of good character;
· the no person associated within the financial industry be the chairperson of the Council;
· that persons associated within the finance industry shall be barred from forming a majority of the Council;
· that the Council shall collectively provide a balance of understanding in respect of
o the regulation of financial service providers;
o the legitimate concerns of consumers of financial services; and
o the legitimate concerns of the financial industry.
· that members of the Council are appointed on terms which secure their independence from those who appointed them, the financial industry, consumer bodies, financial regulators and politicians.
· that members of Council are protected from removal except for incapacity, misconduct, or other just cause and only by the Council, provided it is independent of the financial industry and consumer bodies;
· that members of Council are required to act in the public interest;
· that members of Council be required to disclose any conflict of interest and not be involved in any connected discussion/decision;
· that no person who has worked for a financial service provider or an industry body for the Long-term Insurance Industry during the previous three years, be appointed as Ombudsman;
· that the Ombudsman shall have appropriate dispute-resolution skills;
· that the Ombudsman shall be required to be of good character;
· that if an Ombudsman is re-appointed, that the re-appointment criteria and process preserves his/her independence;
· that if the Ombudsman is to be re-appointed, that he/she is told of the outcome at least one year before the previous term ends;
· that the Ombudsman is protected from removal, except for incapacity, misconduct, or other just cause and only by a body that is independent of the financial industry and of consumer bodies;
· that the Ombud shall be required to act with integrity;
· that the Ombud shall be required to disclose any conflict of interest and not be involved in any connected case;
· that the Ombudsman’s salary be linked to some external benchmark such as the equivalent grade of judge; and
· the Ombudsman’s salary be protected from being influenced by the outcome of cases, and protected from reduction or suspension.
10. Incorrect perceptions might arise about the powers of the Committee, as worded in the Founding Documents, although there have not been any complaints, as far as I am aware, about the independence of the office in recent times. As already mentioned in Section 3, in terms of the Association’s constitution at clause 1.4, the Ombudsman “reports to” not only the Council, but also to the Committee. I have already recommended that this should be changed, as it could give rise to the perception that the industry Committee can give instructions to the Ombudsman or, by subtle means, put pressure on the Ombudsman to take, or desist from taking, certain actions. However, I stress that this is not what happens in practice.
11. Save for my comments about the Committee, the organisational structure of OLTI and its systems promote independence and the perception of independence from the industry, consumers and the regulator. Under the circumstances, I have concluded that in practice, OLTI complies in all respects with the aforesaid INFO Fundamental Principle relating to the Independence of the office. The fact that the World Bank questionnaire may point to some technical additions does not detract from this conclusion.
Scope and Powers
INFO Fundamental Principle
· The financial ombudsman should publish details of:
o The scope of its jurisdiction;
o Its enquiry and case-handling processes;
o Its powers;
o The status of its decisions; any effect on the complainant’s legal rights of using the ombudsman scheme; and
o What information is (or is not) kept confidential.
12. As the heading implies, this Principle has all to do with what information is published by OLTI. The short answer is that OLTI publishes a considerable amount of information. The main sources of information for the public are its website, the various publications mentioned on the website, its Annual Reports and importantly, its Rules. Any member of the public will have no difficulty in establishing contact with the OLTI office as all its contact details are to be found on the website, publications and Annual Reports. It explains the basis of its authority namely recognition as a voluntary scheme in terms of the FSOS Act based, inter alia, upon approval of its Rules. Also published are details of its staff, and its membership of any national network e.g INFO.
13. OLTI also publishes details of the scope of its jurisdiction, including:
· the financial businesses that are covered;
· the types of services that are covered;
· 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 may decline to deal with a dispute that is in its jurisdiction.
14. In regard to its enquiry and case-handling processes, OLTI publishes details, including
· whether the complainant must first complain to the financial business (it must);
· anything that the complainant must do before referring a dispute to the ombudsman scheme;
· whether or not the ombudsman handles enquiries (it does not);
· whether or not the ombudsman scheme uses negotiation/conciliation/mediation (it does);
· whether or not the ombudsman scheme actively investigates cases (it does);
· 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 a dispute to court (it does).
15. In regard to its powers, OLTI publishes the following details:
· 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 an award can carry interest until the date that it is paid;
· whether or not costs can be awarded; and
· whether or not the financial business can be required to do anything else to put things right for the complainant.
16. In regard to the status of its decisions, OLTI publishes the following:
· whether or not they are published;
· whether or not they bind the financial business;
· if binding, how they can be enforced;
· whether or not they bind the complainant; and
· that there is an appeals procedure.
17. In regard to confidentiality issues, OLTI publishes 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.
18. Under the circumstances I am of the view that OLTI complies in all respects with the aforesaid INFO Fundamental Principle relating to the clarity of its Scope and Powers.
INFO Fundamental Principle
· Financial businesses should be required to tell customers about the financial ombudsman scheme
· The financial ombudsman scheme should
o provide comprehensive information on its own website and in other appropriate ways;
o be easily available and accessible to complainants (without any cost barrier);
o communicate clearly;
o make appropriate provision for vulnerable complainants.
19. In terms of the Policyholder Protection Rules all financial service providers are obliged to take certain steps to advise the public about the existence and function of the OLTI office. The relevant provision in the PPR reads as follows:
“18.10.1. An insurer must –
(a) have appropriate processes in place for engagement with any relevant ombud in relation to its complaints;
(b) clearly and transparently communicate the availability and contact details of the relevant ombud services to complainants at all relevant stages of the insurance relationship, including at point of sale, in relevant periodic communications, and when a complaint is rejected or a claim repudiated;
(c) display and/or make available information regarding the availability and contact details of the relevant ombud services at the premises and/or on the website of the insurer;
(d) maintain specific records and carry out specific analysis of complaints referred to them by the ombud and the outcomes of such complaints; and
(e) monitor determinations, publications and guidance issued by any relevant ombud with a view to identifying failings or risks in their own policies, services or practices.
18.10.2 An insurer must –
(a) maintain open and honest communication and co-operation between itself and any ombud with whom it deals; and
(b) endeavour to resolve a complaint before a final determination or ruling is made by an ombud, or through its internal escalation process, without impeding or unduly delaying a complainant’s access to an ombud. “
20. Furthermore in terms of Section 210 (2) of the 2017 Act, the following is prescribed, namely:
“210 (2). A financial institution must disclose to its financial customers applicable ombud schemes, and how to contact and submit complaints to those schemes, in accordance with Ombud Council rules that may be issued in this regard.”
21. However, there is nothing in the OLTI Rules that compels insurers to publicise anything about OLTI. I recommend that the Rules be amended to impose such an obligation upon insurers, if only in order to satisfy compliance with INFO Fundamental Principles on Accessibility. Although such an amendment will not impose any additional obligation upon an insurer, over and above that already imposed in the Policyholder Protection Rules and in the 2017 Act, the publication of such an obligation in the OLTI Rules will ensure wider publicity to the benefit of consumers.
22. As far as I am aware, all member insurers comply with the aforesaid requirements insofar as they are required to advise consumers about the existence of OLTI and the service that it renders and have done so for many years. I am unable to comment on the level of compliance by every insurer as far as the other requirements imposed by the Policyholder Protection Rules are concerned. In any event that falls outside the scope of this Review. The large number of complaints submitted bears testimony to the high level of awareness amongst consumers.
23. OLTI itself communicates clearly about its existence and the free service that it offers in numerous ways. Its impressive, user-friendly website provides details to assist consumers to file a complaint. Its various publications, including, but not limited to its Annual Report, do so. Media exposure also assists. As the office has been in existence since 1985, OLTI is in any event well-known to financial service consumers. The proliferation of various Ombudsman schemes serving different constituencies has further raised the awareness of Ombudsman offices over time.
24. The OLTI website and also its Rules, provides further information such as
· the members of the governing body and their backgrounds;
· the name of the Ombudsman and his background;
· which financial services are covered;
· which activities are covered;
· which complaints are covered;
· what non-customer complaints are covered;
· any time limits within which a dispute must be referred to the ombud scheme;
· the minimum or maximum value of disputes that the scheme can handle;
· the ground upon which the scheme may decline to deal with a case;
· what redress the Ombudsman can award;
· the effect of the Ombudsman’s decision on the financial service provider and the complainant;
· how, and by whom, the Ombudsman’s decision can be enforced;
· what information is kept confidential, and what can be published;
· the scheme’s most recent report;
· whether the complainant must first complain directly to the financial service provider;
· anything else that the complainant must do before referring a dispute to the scheme;
· whether or not the scheme actively facilitates agreed fair outcomes (for example, by mediation, conciliation or other means);
· whether or not the scheme actively investigates cases;
· whether or not bringing a dispute to the scheme suspend any time limit for taking the dispute to court;
· the language(s) in which a dispute can be submitted and can be handled;
· in what languages (other than English) can complaints be submitted and handled.
25. For potential complainants who do not have access to the internet, OLTI ensures that information is readily available through
· consumer advice organisations;
· local consumer advice centres;
· public libraries;
· the press;
· social media;
26. Vulnerable complainants are also catered for.
26.1 OLTI regards complainants as vulnerable taking into account age, disability, level of financial sophistication, financial needs and mental state.
26.2 OLTI accommodates vulnerable consumers by allowing extra time for responses, by taking extra care in explaining procedures, requirements and decisions and by requesting the insurer to assist the complainant to obtain documentation, where possible.
26.3 If the complainant is disabled and it is necessary to hold a meeting, OLTI will take that into account in arranging the location and venue.
26.4 If the complainant is indigent and needs to travel to a meeting or see a medical practitioner or needs to obtain a medical report for a claim, OLTI will cover the costs.
26.5 If a complainant is about to lose a car or house etc. due to inability to pay a credit grantor, OLTI will intervene and make arrangements for a stay of proceedings until the complaint about insurance cover is finalised, when OLTI is able to do so.
26.6 Where an insurer’s treatment or service was poor and the complainant is vulnerable, for instance as a result of a disability or a health condition, this factor will be taken into account in awarding compensation in terms of Rule 3.2.5 for the distress suffered by the complainant. The insurer is expected to be sensitive to the complainant’s mental and physical situation in its dealings with a claim and a complaint.
26.7 Where a complainant lives in rural area and does not have e-mail access and does not respond to an insurer’s submissions during a Transfer process, OLTI will merit check the case so that the complainant is not disadvantaged by lack of means to communicate.
27. ASISA is the umbrella body that represents the interests of a wide range of businesses in the savings and loans sector, including the long-term insurance industry. However, there is nothing on its website that even mentions OLTI. I recommend that an approach be made to ASISA to rectify this.
28. There appears to be very little contact with consumer organisations. This is understandable as the consumer lobby in South Africa lacks influence when compared to some more developed countries. Nevertheless, I would recommend that more engagement be had with the South African National Consumer Union which is arguably the leading consumer organisation in South Africa.
29. I am of the view that OLTI cannot be faulted in its efforts to make access to its services reasonably easy for the average consumer and to inform the public about its existence and role. In view of the aforegoing, I am of the view that OLTI complies in all respects with the aforesaid INFO Fundamental Principle relating to Accessibility for consumers.
INFO Fundamental Principle
· There should be
o a clear definition of what constitutes a complaint; and
o clear obligations on financial businesses to deal with complaints fairly and promptly.
· Financial ombudsman schemes should:
o Have a flexible and informal process (where parties do not need professional advisers);
o Have skilled decision makers; and
o Be properly resourced.
30. I have previously pointed out that OLTI does not have a clear definition of what constitutes a complaint. See my comments in Section 3 under the sub-heading “The Rules “where I suggest a suitable definition. Suffice it to say that I recommend that consideration be given to amending the Rules appropriately.
31. There are indeed clear obligations on financial businesses to deal with complaints fairly and promptly. In regard to fairness, this will be dealt with in Sub -section 5 below. In regard to promptness, reference should here be made to the Rule 18 of the Policyholder Protection Rules under the heading of “Complaints Management “.
31.1 The provisions are extremely detailed, and indeed burdensome for insurers but the objective is clear. Insurers are obliged to regard complaints management as a priority, inter alia, by being obliged to establish a complaints management framework to ensure fair treatment of complainants.
31.2 Although the Policyholder Protection Rules do not specifically state that a complaint must be dealt with promptly, by implication this is what is expected. Amongst the requirements for the said framework, there must be a provision for appropriate performance standards and documented procedures for the appropriate management of complaints, including expected timeframes. As if to emphasise the importance of complaints handling, the board of directors, and not some minor official, is made directly responsible for effective complaints management.
32. OLTI does have a flexible and informal process, where parties do not need professional advisers. However, nowhere in the Rules is it specifically stated that parties do not need professional advisers. I therefore recommend that an appropriate amendment be made to the Rules. However, OLTI does advise complainants that the involvement of legal advisers is not necessary.
33. OLTI also has skilled decision-makers.
33.1 The Ombudsman is a retired judge of the High Court of South Africa and has held the position of Ombudsman since 2013. Judge Ron McLaren is a person who possesses all the numerous attributes necessary to be an outstanding Ombudsman. His legal competence is unquestionable. During his term in office OLTI has performed admirably. His personal involvement in resolving disputes must have had a material, positive impact on all staff, and must have continued to ensure the high regard for the office by the industry.
33.2 OLTI is indeed fortunate to have had the services of Ms. Jennifer Preiss as Deputy Ombudsman for many years. There appears to be nothing that Ms. Preiss does not know about OLTI and ombud schemes, not only in South Africa but worldwide. Her energy and willingness to contribute to the management of the office is more than laudable. She is respected by the world-wide community of financial ombud schemes, largely due to her lengthy and very active involvement in INFO. Her imminent retirement later in 2021 is regrettable.
33.3 Judge McLaren and Ms. Preiss are ably supported by twenty Adjudicators/ Assessors. Although Covid-19 issues have prevented me from having any interviews with any of these staff members, their performance, as reflected in the annual statistic, speaks for itself. Furthermore, their competence is confirmed by referring to the report of Judge Roger Cleaver, in his capacity as Independent External Assessor. In this capacity, Judge Cleaver considers service complaints. In the 2019 Annual Report, Judge Cleaver reports having dealt with three complaints. In all three Judge Cleaver concluded that the complainant had no grounds for complaint.
34. In 2019 OLTI commissioned a Human Resources Review by Ms. Anna Odendal of Mazars HR Advisory Services. As the name implies, it focused on staff issues covering the following areas, namely
· Governance and compliance
· Talent management; and
· Organisation management.
I do not deem it necessary to repeat what is contained in the written report but merely summarise its conclusions. Of the twelve areas of enquiry, it was found that none presented any risk to the organisation, five presented some risk and seven raised no concerns. Ms. Odendaal identified various opportunities and recommendations which are set out in her report. I recommend that a follow-up survey be done by Ms. Odendaal during the latter part of 2021 to investigate compliance with her recommendations.
35. OLTI appears to be properly resourced but certainly without any “fat”. However, I do have some concerns about the increasing number of complaints that staff have recently had to deal with and of the numerous “non-core’’ activities that will need attention in the near future. By “non-core activities “I mean activities that are not directly related to dispute resolution. I recommend that an increase in the workload should be catered for, in advance, due to the following:
· The enactment of Chapter 14 of the 2017 Act will place demands on the office arising from the oversight of the office by the Ombud Council established in terms of the Act.
· In terms of Section 211(3) of the Act, it will become compulsory for all long-term insurers to become a member of the scheme. Logic dictates that this will generate more work.
· The work involved in implementing the merger of OLTI and OSTI.
· The natural growth in complaints which will probably be exacerbated by the financial stress currently being experienced by consumers.
36. I am satisfied that the Council keeps a close watch on the critical issue of resources and affords the office the necessary support. However, when asked about the current level of resources, the Deputy Ombudsman answered as follows.
· That since about August 2020 and continuing into 2021, OLTI has experienced a sharp increase in complaints as a result of Covid-19. Although the office has recruited extra adjudicative and support staff, it takes time to train staff and get them fully functional. The office was ‘’taking strain”.
· Apart from staff, the office was sufficiently resourced.
· However, there may be a need for an increased budget for staff and outreach functions.
37. The effectiveness of the office has been further enhanced by the introduction in 2015 of a new procedure, namely early conciliation. Mention can also be made of the training afforded to claims and underwriting staff of insurers and the positive and constructive relationship which insurer members have with the office. These issues are referred to with approval by the Chairperson of the Ombudsman’s Committee in the 2018 and 2019 Annual Reports. Also adding to the effectiveness of OLTI, is its marketing, its public relations activities and its contribution to consumer education, although this is not a function of the office.
38. Case management processes lend themselves to efficient decision making. The quality assurance processes are set out in a Process Manual and a Work Flow Diagram. I perused ten closed case files chosen by me at random. This exercise, together with other considerations, such as the personal involvement of the Ombudsman and Deputy Ombudsman, satisfy me that quality assurance processes are adequate.
39. Apart from the provision of additional staff, there appears to be little, if anything, that can be done to promote the earlier resolution of complaints. The time taken to resolve disputes is acceptable. The appeals process referred to in Rule 6 is simple with every assistance being rendered to Complainants by the office.
40. Facts which do not appear to be of particular importance may nevertheless be good indicators. Thus, for example, OLTI has a system which records the number of telephonic enquiries it receives each year, namely 16,183 in 2017, 16,921 in 2018 and 17,877 in 2019. This is impressive. Also praiseworthy is the conclusion of an agreement with the Cape Peninsula University of Technology in terms of which internships and vacation work will be offered to students from a historically disadvantaged background who are registered on programs in the Unit for Applied Law.
41. Current circumstances must have impacted negatively on the effectiveness of the office through no fault of its own. I refer here again to the impact of Covid-19, forcing most staff to work remotely from home, and electricity load-shedding, which is having a serious effect on productivity across the whole economy. Such issues add to an already stressful work environment, given the high case-load. The staff can only be commended for coping with such difficulties to the extent that they have.
42. Save for the absence of a definition of a complaint, OLTI complies in all respects with the aforesaid INFO Fundamental Principle relating to Effectiveness.
INFO Fundamental Principle
· The financial ombudsman scheme should:
o be prompt;
o be impartial;
o proceed fairly; and
o tell the parties in writing its decision and the reasons for it.
43. If a complaint is outside of the jurisdiction of OLTI, or if it is inappropriate for the OLTI to deal with it for any reason, the complainant is promptly advised of this and the reasons for it. OLTI ensures that the complainant and the insurer
· can put forward their information and arguments;
· can comment on the other party’s information and arguments;
· can see a copy of any expert statement/opinions obtained by OLTI;
· can comment on any expert statements/opinions obtained by OLTI;
· are told that they do not need an attorney, an advocate or any other type of legal adviser;
· are told that they may seek independent advice or be represented/assisted by a third party; and
· are notified of the outcome, with reasons, in writing.
44. OLTI deals promptly with all stages of its enquiry and dispute-resolution processes and reaches its decision impartially.
44.1 In regard to promptness, the statistics provided in the 2019 Annual Report, the latest report available to me, make for interesting reading. 6107 chargeable complaints were received in 2019. 91% of complaints were finalized within six months and 5248 complaints were closed within 180 days. This is an impressive performance.
44.2 In regard to impartiality, I had the pleasure of attending, albeit remotely, a meeting of Adjudicators chaired by the Ombudsman and attended by the Deputy Ombudsman. Prior to the meeting, notes summarizing the facts and legal issues about each case to be discussed had been circulated to all participants, including me. This ensured that all participants came to the meeting fully prepared. Listening to the high-quality discussion, there was many a reference to the principle of equity i.e. fairness. It was clear to me that all participants know that they should resolve complaints not only by the strict application of the law, but after applying considerations of equity, where appropriate. In other words, the approach was entirely consistent with what the office is mandated to do.
45. The INFO Fundamental Principle dealing with Fairness, in effect, introduces the concept of natural justice. It does not specifically refer to “equity” in the sense of not necessarily abiding by the strict dictates of the law in resolving complaints. However, equity in this sense is, correctly, applied by OLTI when resolving complaints. The principle of equity is referred to in
· the Rules (see Rules 1.2.4 and 1.2.7); and
· the FSOS Act (see section 10(1)9(e)(iv)); and
· the 2017 Act, which provides that an ombud scheme will not be recognised unless its Rules specifically require the ombudsman to apply, where appropriate, principles of equity (See section 196(3) (b) (vii)); and
· the Policyholder Protection Rules (See Chapter 2 thereof).
46. Importantly, by becoming a member of the scheme, insurers bind themselves to “act with fairness and with due regard to both the letter and spirit of the contract”’. (See Rule 1.2.7). The procedures and outcomes are fair and appear to be perceived as fair. The procedures are transparent and clear and complaints are properly and fully considered in line with natural justice. The decisions are reached by a rigorous and credible approach. I am unable to recommend any changes of approach.
47. The application of equity by the office was brought into sharp focus when, in 2018, it made a ruling against a complainant in what became to be known as the Ganas/Momentum case. I cite the following extracts verbatim from the Annual Report of 2018.
· “The case, which had been determined by our office, concerned the repudiation of a policy on the ground of non-disclosure of material information at application stage.
· We upheld Momentum’s right to repudiate the policy and decline the death claim. The public’s criticism centred on the fact that the cause of death was not connected to the non-disclosed information.
· In our final determination we applied the law to the facts, as we established them. We also applied our equity/fairness jurisdiction in considering whether the insurer would have issued a policy, had it known all the facts.
· The causal connection is between the non-disclosure and the conclusion of the contract and not between the non-disclosure and the claim event, for instance, death.
· In the exercise of its equity jurisdiction, this office is a strong proponent of the view that, in the event of a non-fraudulent misrepresentation, the policy should be “reconstructed” to what it would have been if there had not been a non-disclosure. This view is implemented according to the “Didcott principle”, named after the late Judge Didcott.
· The legislature should, at the very least, give consideration to the introduction of the Didcott principle into legislation.”
The relevance of the aforegoing should be obvious, namely that the office is very aware of its duty to apply equity and thereby advance fairness. It is encouraging to note that since the publication of the 2018 Annual Report, the Financial Services Conduct Authority has proposed that the introduction of the Didcott principle as law, be considered by a Steering Committee.
48. It is the practice of OLTI, before asking the complainant to accept a settlement or a decision, to tell the complainant of the legal effect (if any) of accepting the settlement or decision. Although most unlikely to arise, the complainant would also be told that the proposed settlement or decision is less advantageous to the complainant than a court would give. The complainant is always given a reasonable time to make up his or her mind.
49. In view of the aforegoing, I am of the view that OLTI complies in all respects with the aforesaid INFO Fundamental Principle relating to Fairness.
Transparency and Accountability
INFO Fundamental Principle
· Financial ombudsman schemes should
o pay due regard to the overall public interest in forward-planning and day-to-day operations;
o consult publicly about their scope, procedures, business plans and budgets; and
o publish a report at least yearly, explaining the work that they have done.
50. The overall public interest is served where justice prevails. The Mission Statement published in the Rules (paragraph 1) puts it beyond doubt that OLTI makes a meaningful contribution to the common good by dispensing natural justice.
51. However, OLTI does not appear to consult publicly about its scope, procedures, business plans and budgets. In my view there is no need to do so. There are enough checks and balances in place to in order to achieve its mission. The principle, as expressed in the INFO document, does not define what is meant by public consultation, although I interpret it to mean that any member of the public should be invited to be consulted. This is simply impractical and unnecessary.
52. The Annual Reports published by OLTI and the information on its website alone give any interested person a fully detailed and transparent account of the activities of the office.
· Adequate statistics are provided.
· The reporting lines to the Council, the Committee and the Audit and Risk Committee ensure accountability of the highest order.
· Appropriate processes are in place for managing complaints about OLTI. In this regard I have already referred to the role played by the Independent External Assessor, Judge Roger Cleaver.
· The 2017 Act introduces yet another oversight body, ensuring accountability through the powers vested in the Ombud Council.
· This Independent Review is yet a further way of ensuring accountability and goes far beyond what even INFO or the World Bank appear to prescribe.
53. Systemic industry issues are reported to the Financial Sector Conduct Authority. Thus, in the 2019 Annual Report matters raised were
· the failure by an insurer to respond to correspondence;
· the increase in complaints about Universal Life policies; and
· that some new products generated complaints because of unusual policy structures or insurer’s practices.
54. I am unable to make any further recommendations, notwithstanding the fact that one of the three elements of the INFO Principle relating to Accountability and Transparency (the lack of public consultation) is not met. Save in this regard, OLTI complies with the aforesaid INFO Fundamental Principle relating to Transparency and Accountability.
Section 6. Summary of Recommendation
As I have made several recommendations, I will summarise, in point form and only for the purposes of convenience, the recommendations made and where they can be found in the body of the report. They are:
The Constitutional Documents.
1. Complete re-draft of the Constitutional Documents. (See Section 3).
2. Obtain independent professional advice about complete re-draft of the Constitutional Documents. (See Section 3).
3. Amend the Association’s Constitution to take account of the several points raised in the World Bank questionnaire. (See Section 5).
4. Amend the Association’s Constitution so that the Ombudsman reports only to the Council (See Section 5).
5. Amend the Rules. (See Sections 3 and 5).
Review of Corporate Structures and Practice
6. Consider establishing an Executive Committee. (See Section 4).
7. Amend the powers of the Committee (See Section 3).
8. Consider revolving auditors every five years. (See Section 4).
9. Investigate any benefits to be gained by employing internal auditors. (See Section 4).
Performance review of Council members.
10. Consider taking advice on how this should be done. (See Section 4 ).
Review of future workload.
11. Review future workload as a consequence of statutory reforms. (See section 5 ).
12. Consider requesting ASISA to do more to publicise Ombud schemes in general and OLTI in particular. (See Section 5).
The South African Consumer Union.
13. Consider more engagement with The South African Consumer Union. (See Section 5).
Human Resources Review.
14. Consider instructing Ms. Odendal of Mazars to do follow-up review. (See Section 5).
Review necessary resources to cater for increased workload.
15. Plan for increase in resources due to anticipated workload. (See Section 5).
1. This review confirms what I suspect has long been known to the now-defunct FSOS Council, the South African Treasury, INFO, the Long-term Insurance Industry and the public, namely that in OLTI, South Africa has one of the most reputable financial Ombud schemes in the world. Its near-total compliance with each and every element of the INFO Fundamental Principles bears testimony to the fact. As we approach a new dawn with the implementation of the 2017 Act, I can only envy the Chief Ombud, when appointed, and those who will sit on the Ombud Council. Hopefully they will soon appreciate what they have inherited.
2. I have already expressed my appreciation for the outstanding work done by the Ombudsman, Judge Ron McLaren and his able assistant, the Deputy Ombudsman, Ms. Jennifer Preiss. However, their contribution needs again to be acknowledged, as must be that of all staff members, currently working under extremely stressful circumstances.
3. In conclusion, I record my thanks to all the helpful individuals at OLTI who have assisted me in compiling this review, under difficult circumstances. I regret that circumstances have not enabled me to do the in-depth, face-to-face, on-the-spot investigations that I would normally have done. I wish all who contribute towards a just society, through their association with this initiative, well and thank them all for their invaluable contributions.
THE OMBUDSMAN FOR LONG-TERM INSURANCE
CONSTITUTION OF THE ASSOCIATION
1.1 The Office of the Ombudsman for Long-term Insurance was established on 1 January 1985.
1.2 The Mission of the Ombudsman is to mediate in disputes between the Subscribing members of the Industry and policyholders.
In doing so, the Ombudsman will seek to ensure that:
· he acts independently and objectively in advising on any complaint received (referred to as the complaint handling process) and takes no instructions from anybody regarding the exercise of his authority.
· The Subscribing Members of the industry act with fairness and with due regard to both the letter and spirit of the contract between the parties and render an efficient service to those with whom they contract;
· He keeps the scale in balance between the rights of the policyholders on the one hand and the rights of the Subscribing Members on the other; and
· Due weight is given to considerations of equity.
1.3 The rulings of the Ombudsman are binding on Subscribing Members. However, its rulings do not bind policyholders. Their right to institute legal proceedings in a court of law remains unaffected by any ruling made by the Ombudsman.
1.4 The Ombudsman reports to two bodies, the Council (as defined) and the Committee (as defined), on matters that are required to be dealt with by the Council and/or the Committee in the performance of their respective functions.
1.5 The purpose of the Council is to facilitate the provision by the Office of the Long-term Insurance Ombudsman of independent, equitable, speedy and cost-effective mediation between complaining policyholders and Subscribing members of the Industry.
1.6 To this end, the Council:
1.6.1 appoints or reappoints the Ombudsman and Deputy Ombudsman and settles the terms and conditions of their employment;
1.6.2 receives the Ombudsman’s Annual Report and ongoing updates on the Ombudsman’s activities;
1.6.3 approves any changes to the published Rules and policy guidelines governing the Ombudsman’s powers and activities to ensure that they comply with the purpose stated above;
1.6.4 monitors, maintains and promotes the Ombudsman’s independence;
1.6.5 gives input on any legislative or regulatory change affecting the Ombudsman and the exercise of his responsibilities;
1.6.6 assists in ensuring that the financial services industry, consumer bodies, the media and the general public understand the role , function and activities of the Ombudsman; and
1.6.7 generally take such steps as may be necessary to facilitate the purposes stated above.
1.6.8 the powers set out in paragraphs 1.6.1 and 1.6.3 above are exercised by the Council after consultation with The Committee.
1.7 The Committee concerns itself primarily with the efficient operations of the Ombudsman’s office. In this context it:
1.7.1 considers and recommends to Council appropriate mechanisms for financing the Ombudsman’s operational costs;
1.7.2 communicates to the Ombudsman industry views concerning any operational issues including the efficiency of the service rendered by the Ombudsman’s Office;
1.7.3 receives and comments upon the Ombudsman’s annual report; and
1.7.4 acts as a consultative body to The Council in respect of :
a. the appointment of the Ombudsman;
b. the terms of his appointment and of senior staff;
c. any changes to the rules under which the Ombudsman operates;
d. any legislative or regulatory change affecting the Ombudsman and the exercise of his responsibilities; and
e. any extension or limitation of the jurisdiction of his office.
2. Pre-establishment Resolutions
2.1 By resolution dated 7 May 2002 The Committee resolved that it would peruse and comment on the budget before submission to The Council which would be responsible for the approval of the budget.
2.2 By resolution dated 9 May 2002 The Council resolved to approve the proposal that final approval of the budget be the responsibility of The Council.
2.3 By resolutions of the Committee and The Council passed on 19 March and 20March 2003 respectively, it was resolved that a Long-Term Insurance Ombudsman’s Association (“The Association”) be established.
3. Establishment of Voluntary Association
A Voluntary Association, under the name and style of The Long-term Insurance Ombudsman’s Association, is hereby established as a legal persona, distinct from its Members, functioning not for gain but for the purposes set out in paragraph 1.2 above, with the capacity of acquiring rights, owning property, incurring obligations, having the power to institute and defend legal proceedings in its own name, and with the attribute of perpetual succession.
4. Council as an organ of The Association
4.1 The Council is hereby confirmed as a separate organ of The Association.
4.2 Each member of the Council, on accepting appointment as such, subscribes and agrees to the provisions of this Constitution.
5. Committee as an organ of The Association
5.1 The Committee is hereby confirmed as a separate organ of The Association.
5.2 Each Subscribing member, in subscribing as such, shall be deemed to have subscribed and agreed to the provisions of this Constitution and the Rules.
6. The Constitutional Provisions of The Association
In this Constitution, unless otherwise required or indicated by the context, the singular shall include the plural and vice versa, the masculine gender shall include the feminine gender and vice versa, natural persons shall include legal and juristic persons and vice versa, and the following terms shall have the meanings assigned to them hereunder, namely:
6.1 The Subscribing Members shall mean: Those members of the Long-term insurance industry who, from time to time, are Subscribing Members to the Rules of the Ombudsman for Lon-Term Insurance.
6.2 The Members shall mean: The Members of The Association referred to in paragraph 7 below.
6.3 The Council shall mean: The Ombudsman’s Council, referred to above.
6.4 The Committee shall mean: The Long-term Insurance Ombudsman’s Committee, referred to above.
6.5 The Association shall mean: The Long-Term Insurance Ombudsman’s Association, referred to above
6.6 The Ombudsman shall mean: The Long-Term Insurance Ombudsman, appointed by the Council.
6.7 The Deputy Ombudsman shall mean: The Long-term Insurance Deputy Ombudsman, appointed by the Council.
6.8 The Policyholders shall mean: The holders of policies of whatever nature issued by the Subscribing Members.
6.9 The Office shall mean: Collectively, the Ombudsman, the Deputy Ombudsman, the Assistant Ombudsmen, the Finance and Operations Officer and the staff engaged in managing the complaint handling process, referred to above.
6.10 The Rules shall mean: The Rules as approved by the Council and published annually in the Annual Report of the Ombudsman.
6.11 The financial year-end of the Office shall be 31 December of each year.
7.1 the members of The Association are:
7.1.1 The Chairman of The Council, from time to time.
7.1.2 The Chairman of The Committee, from time to time.
7.1.3 The Ombudsman for Long-Term Insurance, from time to time.
7.1.4 The Deputy Ombudsman from time to time.
7.1.5 The persons appointed as Assistant Ombudsmen, from time to time.
7.1.6 The Finance and Operations Officer, from time to time.
7.2 Save for the Chairman of The Council and The Committee, membership of the Association shall be confined to and be dependent on permanent employment of such member as Ombudsman, Deputy Ombudsman, Assistant Ombudsman or Finance and Operations Officer.
8. Authority to Act
8.1 The Council is vested with the authority, on behalf of The Association, to appoint the Ombudsman and the Deputy Ombudsman and to determine all matters relating to their conditions of service and remuneration.
8.2 The Ombudsman, the Deputy Ombudsman and the Finance and Operations Officer are jointly and severally vested with the authority to enter into legal acts on behalf of The Association.
8.3 The Ombudsman, the Deputy Ombudsman and the Assistant Ombudsmen are vested with the authority to give rulings relating to the complaint handling process.
9. Administration of the Office
9.1 The Ombudsman and Deputy Ombudsman shall have overall responsibility for the conduct of the day-to-day administration and business of the office and serve, whenever it is necessary to do so, as the executive of The Association with the power of co-option.
9.2 The Ombudsman and Deputy Ombudsman shall have the power, on behalf of The Association, to appoint employees and to determine all matters relating to their conditions of service and remuneration.
9.3 The Ombudsman and Deputy Ombudsman shall have the power generally to do anything that is necessary or expedient for the running of the office, which may include issuing guidelines for the implementation and application of the Rules.
10.1 The members of The Association shall meet from time to time but not less than twice per calendar year, in each instance following upon the meetings of the Council and the Committee.
10.2 Such meetings shall be convened by the Chairman of the Council, failing which, the Chairman of the Committee, failing which, the Ombudsman, provided that it shall be convened, if so requisitioned, at any time by at least four (4) Members.
10.3 The meeting shall:
i) receive and consider all resolutions adopted at the immediately preceding meetings of The Council and the Committee;
ii) consider any other matters relating to The Association as such and the business, functioning and operation of the office.
10.4 Minutes shall be kept of the proceedings of the meeting, including a record of the members present at each meeting. Such minutes shall be signed by the Chairperson and shall be available at all reasonable times to Members.
10.5 The minutes of each such meeting shall be reported at the next succeeding meetings of both the Council and the Committee.
10.6 The quorum shall consist of at least one of the Chairman of Council, the Chairman of the Committee or the Ombudsman, as well as three (3) other members.
10.7 Each member who is present shall have one vote. Voting shall take place by a show of hands.
10.8 A “round robin “ Resolution signed by all members shall be as valid as if passed at a duly convened meeting.
11. Powers of The Association
The Association shall be seized with the power to do all things necessary to give effect to The Mission of the Ombudsman as set out above. More particularly it will be empowered as follows:
11.1 to mediate and, if it is considered necessary or appropriate, to adjudicate on any complaint or dispute lodged or referred to him by policyholders;
11.2 to prepare and submit to the Council an Annual Report dealing with the activities and finances of the Office for the year in question and to report , as and when it is considered appropriate, on current matters and activities;
11.3 to promote, within the financial services industry and the public domain, the services provided by it and the Office by ensuring the appropriate publication and dissemination of reports in the media and to consumer bodies;
11.4 to identify and bring to the attention of the Subscribing Member concerned any undesirable practices to which the Subscribing Member may be a party and if necessary, to report such matter to the chairman of the Committee;
11.5 to appoint such personnel as would be reasonably required to ensure an efficient management of such complaints as the office may receive from time to time;
11.6 to enter into contracts of employment with such personnel;
11.7 to enter into contracts with any entity carrying on fidelity insurance business in the Republic whereby The Association and its Members are indemnified against public liability;
11.8 to enter into agreements of purchase, sale and letting and hiring of property, both movable and immovable, reasonably required for the purposes of the functioning of the Office;
11.9 to open such bank and other accounts as are reasonably necessary for the performance of its obligations by the office;
11.10 to make recommendations to the Council for amendments to the Rules and policy guidelines;
11.11 to determine, in consultation with the Ombudsman’s Council and the Ombudsman’s Committee, a charge-out for the services The Association renders to the Subscribing Members in managing complaints received;
11.12 to institute and defend legal proceedings in its own name;
11.13 to facilitate and enlist as Subscribing Members any registered long-term insurer who in the opinion of the Association is fir and proper to be so enlisted and is prepared to subscribe to the Rules;
11.14 to apply its funds, inclusive of reserves and surpluses, and notwithstanding anything to the contrary herein contained, in promoting the objects of The Association and the functioning of the office, provided that no distribution of reserve or surplus funds and no extraordinary and excessive remuneration shall at any time be effected to any employee, office bearer or Member of The Association; and to invest its funds only in those investments identified in section 30(3)(b)(ii)(aa),(bb) or (cc) of the Income Tax Act, No.58 of 1962.
11.15 to do all things reasonably necessary for the achievement of its objects;
11.16 to receive any donations, save that the Association is prohibited from accepting any donation which is revocable at the instance of the donor.
Save that the Association may not use its resources directly or indirectly to support, advance, or oppose any political party.
Each member of The Association, of The Council and of The Committee is indemnified by The Association in respect of all decisions and acts of omission or commission mad and undertaken in good faith on its behalf; and it shall be the duty of The Association to reimburse such persons in respect of any costs or expenses incurred in the bona fide discharge of such person’s fiduciary responsibilities to The Association, The Council and The Committee.
13. Amendments to the Constitution.
This Constitution may be amended by resolution of the members, duly approved by the Council after consultation with the Committee, and the Association shall submit to the Commissioner for SARS a copy of any amendment to this Constitution.
14.1 The Association may be re-constituted or dissolved by resolution of the members, duly approved by both the Council and the Committee; or by any cause recognised by law for its dissolution.
14.2 Upon dissolution, and subject to the provisions of par.11.14, the assets of The Association shall devolve on another body which has a purpose and a function similar to that of The Association.
Note: The use of capital letters and underlinings in the Association’s Constitution has been reproduced above exactly as presented. DJ. March 2021.
THE OMBUDSMAN FOR LONG_TERM INSURANCE
CONSTITUTION OF THE OMBUDSMAN’S COUNCIL
The Council is constituted as an independent organ of the Office of the Ombudsman, in accordance with the following provisions, viz:
1. MANDATE AND RESPONSIBILITIES
The purpose of the Council is to facilitate the provision by the Office of the Long-term Insurance Ombudsman of independent, equitable, speedy, and cost-effective mediation of disputes between policyholders and subscribing members of the Long-term Industry.
To this end:
1.1 appoints or re-appoints the Ombudsman and Deputy Ombudsman and settles the terms and conditions of their employment, provided that in appointing the Ombudsman it will fix the period of employment for at most 5 (five) years, renewable for a maximum further period of 3 (three) years;
1.2 receives the Ombudsman’s Annual report and ongoing updates on the Ombudsman’s activities;
1.3 approves any changes to the published rules and policy guidelines governing the Ombudsman’s powers and activities to ensure that they comply with the purpose stated above;
1.4 monitors, maintains and promotes the Ombudsman’s independence;
1.5 assists in ensuring that the financial services industry, consumer bodies, the media and the general public understand the role, function and activities of the Ombudsman;
1.6 generally takes such steps as may be necessary to facilitate the purpose stated above.
The powers set out in paragraphs 1.1 and 1.3 above will be exercised by the Council after consultation with the Ombudsman’s Committee.
2.1 The current membership of the Council comprises the following persons, viz :
2.1.1 Judge JOHN SMALBERGER, Chairperson of the Council.
2.1.2 Adv. SELBY BAQWA, Vice Chairperson of the Council.
2.1.3 Mr. KEN BALDWIN
2.1.4 Mr. MOSES MOELETSI
2.1.5 Mrs. MPHO THEKISO
2.1.6 Judge LEONA THERON
2.1.7 Judge BRIAN GALGUT, ex officio in his capacity as THE OMBUDSMAN.
2.1.7 Mrs. DOREA OZROVECH, ex-officio in his capacity as Chairperson of the Ombudsman’s Committee.
2.1.8 Mr. JONATHAN DIXON, ex officio in his capacity as nominee of the Financial Services Board.
2.2 There shall at all times be not less than Five (5) nor more than Eleven (11) persons appointed as Members of the Council. If at any time, as a result of retirement, resignation, death, or for any other reason, the number of members shall fall below such stated minimum, then the remaining Members shall cause other persons to be co-opted as additional Members.
2.3 Three of the members of the Council are to be appointed ex officio, viz:
2.3.1 The Ombudsman;
2.3.2 The Chairperson of the Ombudsman’s Committee; and
2.3.3 A nominee of the Financial Services Board, which may from time to time remove and substitute its nominee.
All other Members of the Council are appointed in their personal capacity, having due regard to the knowledge and skills required by the Office of the Ombudsman, and the need to represent the broad public interest and promote public confidence.
2.4 The Council may appoint any one or more members of the Council provided that the total number of members shall not exceed eleven (11).
3. PERIOD OF APPOINTMENT
Save for those persons who serve ex officio as Members of the Council, all its other Members shall be appointed for a term of Three (3) years, but shall be eligible for reappointment for successive terms of Three (3) years each.
4. PERSONAL APPOINTMENT
Each member of the Council, including those nominated and appointed ex officio, shall be obliged to act in the best interests of the Office of the Ombudsman, and are deemed to have been appointed in their personal capacities, notwithstanding that they may serve ex officio, or as nominees. An ex officio member of Council may for the purposes of attendance at a meeting of the Council and with the approval of the Chairperson, appoint an alternate to attend on his/her behalf. Save as aforestated, no member of the Council shall be permitted to appoint an alternate or representative to act on his or her behalf.
5. PROCEDURES AT MEETINGS
The business of the Council shall be conducted in accordance with such procedures as may be determined by the Chairperson from time to time, on the basis that:
5.1 The members shall elect from their own number persons who will serve respectively as Chairperson and Deputy Chairperson.
5.2 The Chairperson (or in his or her absence, the Deputy Chairperson) may convene meetings of the Council at any time, but shall be obliged to convene a meeting if so requisitioned at any time by at least Three (3) Members of the Council.
5.3 The quorum necessary for the transaction of the ordinary business of the Council shall be Four (4) members.
5.4 At meetings of the Council each member shall have One (1) vote.
5.5 Save as provided in Clause 8 below, all questions arising shall be decided by a majority of votes. However, in the event of an equality of votes, the Chairperson shall have a second and casting vote.
5.6 Proper Minutes shall be kept of the proceedings of the Council, including a record of the Members present at each meeting. Such minutes shall be signed by the Chairperson, or his/her Deputy, and shall be available at all reasonable times to Members of the Council.
5.7 A “round robin” Resolution signed by all members of the Council shall be as valid as if passed at a duly convened meeting.
5.8 The Council may delegate such of its powers and prerogatives as it may deem appropriate to one or more of its members, or to a specially constituted sub-committee. The member or sub-committee to whom such delegation is made, shall conform to any stipulations or procedures that may be determined by the Council from time to time.
6.1 Notice of Meetings of the Council shall be sent to all its Members, either personally, or by prepaid registered post, or in such other manner (including facsimile or e-mail) as may be deemed expedient by the Chairperson.
6.2 The inadvertent omission to address notice/s to any Member shall not invalidate the proceedings of the resultant meeting.
Each Member of the Council is indemnified by the Office of the Ombudsman in respect of all decisions and acts made and undertaken in good faith on its behalf; and it shall be the duty of the Office of the Ombudsman to reimburse members in respect of any costs or expenses reasonably and necessarily incurred in the bona fide discharge of such Member’s fiduciary responsibilities to the Council.
8. AMENDMENT OR DISESTABLISHMENT
This constituting document, including the mandate of the Ombudsman’s Council, may be amended, the name may be changed, and the Council may be disestablished at any time, by Resolution of the Council, provided that any such resolution is supported by no less than Tw-thirds of its members at the relevant time, being not less than the minimum number stipulated above; and provided further that any such Resolution must also be approved by Resolution supported by a majority of the Members of the Ombudsman’s Committee.
Note: The use of capital letters in the Council’s Constitution has been reproduced above exactly as presented. DJ. March 2021.