CR315 Premiums- Collected after cover ceasing
Collected after cover ceasing – funeral cover ceasing at age 65 – member’s premiums continuing, however, until her death at age 67 – death claim repudiated – complaint settled on basis that half claim paid, plus refund of premiums after age 65.
1. The complaint in this case was lodged by attorneys representing the estate of a deceased member of an employment funeral scheme insured by the insurer. Premiums had been deducted from the member’s salary for funeral cover from 1998 until her death on 3 September 2008. The insurer repudiated the death claim on the basis that she had been 67 years old at the time of her death, whereas in terms of the policy the cessation age for cover was 65.
2. The insurer pointed out that the policy provided an option for the life insured to apply, within one month of cessation age, for an individual funeral policy without a declaration of health, and relied on the fact that when she turned 65 the complainant could have exercised this option but did not do so. The insurer argued that it “cannot be held liable for failure of clients to adhere to the terms and conditions of the policy they voluntarily took”.
3. Our office noted that the policyholder was the administrator/broker of the scheme. We asked the insurer how the member would know what the provisions of the policy were. The insurer stated that the policy was sent to the broker, that the broker was responsible for informing the employer and the members of the scheme of the terms of the policy, that the employer deducted the premiums and that the broker forwarded the premiums to the insurer. The insurer therefore regarded the broker as its client, and the employer/members as the clients of the broker. It stated: “[The insurer] has discharged its responsibility of issuing out the policy document to the broker and cannot be held liable for the action of the broker. This is a standard practice that happens to every broker, we don’t interact with their clients”.
4. We noted that in terms of the policy the broker must supply the insurer with all information necessary to properly assess the risk, and we pointed out that this would surely include the members’ dates of birth. We asked whether it would not be irregular for the insurer, having in its possession the information as to the date when a principal member turns 65 (cessation age), nevertheless to continue to accept premiums from the policyholder. We suggested that good administrative standards would dictate that the insurer advise a policyholder when a specific principal member has reached cessation age, that no further premiums should be collected, and at the same time the principal member should be advised of his/her continuation option in terms of the policy.
5. We put it to the insurer that the member and her family were clearly under the impression that she still had funeral cover at the date of her death, and that this impression was justified in light of the fact that premiums had continued to be accepted by the insurer, and the fact that neither the broker nor the insurer made any effort to apprise her of the terms and conditions of the policy, including the continuation option. We requested the insurer to consider making a settlement offer, taking into account the amount of premiums refundable, as well as the poor service rendered to the complainant.
6. The insurer made an offer to pay an ex gratia amount of R2 500, half of the benefit, together with a refund of premiums paid after cessation age. The attorneys for the estate accepted the offer.