CR118 Retirement annuity policy – surrender of policy on basis of incorrect quotation of surrender value

See too: Annuities, CR,

CR118

Retirement annuity policy – surrender of policy on basis of incorrect quotation of surrender value – reasonable reliance

Background

The complainant had a retirement annuity policy with insurer A but because he was unhappy with its performance he decided to transfer the proceeds to insurer B for purchasing an annuity on early retirement. Insurer A calculated the transfer value of the policy and duly advised the complainant of the amount that he would receive. He thereupon completed an application with insurer B for the investment of the amount he was to receive. When the funds were transferred to insurer B, the amount was R23 000 less than quoted. Following enquiries by the complainant and an investigation by both insurers A and B it was determined that insurer A had erroneously calculated the value to be paid and had neglected to advise the complainant of the error before it paid the amount to insurer B.

Discussion

The complainant had been advised by insurer A of the specific amount that was available for reinvestment as an annuity and he had approached insurer B for that purpose. All documentation was completed based on the specific amount which he expected to receive which amount had already included an early retirement penalty. The question arose whether the complainant would have taken early retirement had he known that the amount he was to receive was R23 000 less than he anticipated.

We advised insurer A that we were of the opinion that it had led the complainant to believe that a specific amount was to be paid and that that information could have influenced the complainant to retire early. It is uncertain whether he would have changed his mind had he known the real value of his policy but he was nonetheless deprived of the opportunity to reconsider his position. We suggested that insurer A, as a result of its negligent error and based on the principle of quasi-mutual assent (the reliance theory), consider paying the full amount as originally quoted.

Result

Insurer A paid the complainant the total amount as originally quoted into the annuity policy.

MFBR
October 2005

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