CR297 Conclusion of contract- Quotations provided for joint life annuities
Conclusion of contract CR297
Quotations provided for joint life annuities – applications completed without details of second life assured – single life annuities issued – duty on insurer to compare applications with quotations.
1. The complainant’s financial adviser obtained two quotations for joint life annuities from the insurer, and provided them to the complainant. The first quotation indicated that if he invested R109 973 he would receive a monthly income of R555, and the second indicated that if he invested R355 655 he would receive a monthly income of R1 843.
2. In applications for two policies the complainant filled in the forms with his personal details, and the advisor filled in the figures as per the quotations, which were signed and sent in to the insurer along with the signed applications. Unfortunately the complainant mistakenly filled in his wife’s details in the space under “Nominated Beneficiary”, rather than under “2nd Life Covered”.
3. The insurer only had regard to the applications, and issued the policies as single life annuities, with monthly incomes of R765 and R2 520 respectively. It appears that the complainant did not notice this until about 8 months later, when his advisor picked up the problem on annual review. The complainant maintained that the insurer should have contacted him before they issued the policies with an income which was different to that on the applications, but the insurer refused to assist him.
4. The insurer insisted that the quote was simply a transaction between the client and the financial adviser, illustrating various options available so that the client could make an informed decision, and argued that the quote was not part of the contract and that it was the adviser’s responsibility to ensure that the application form was completed accurately and in accordance with the quote. The insurer only issues a contract in accordance with the information contained in the application form.
5. We pointed out to the insurer that, although it is the responsibility of the client and/or the financial adviser to ensure that the information on the application is correct, the insurer had been presented with the applications and the quotations on which the applications were based. The applications contained a reference to the quotation date, with the following words “I confirm that the QUOTE version 89 quotation date 13/10/2008 was used to generate the quotation following upon which this application was submitted”. The applications had the same income figures filled in as appear on the quotations. We noted that the insurer changed the income amounts from those reflected on the applications when issuing the policies, apparently without checking why the new income figures differed materially from those on the applications. In fact the reason they were higher must have been because they were calculated on a single life and not joint lives. This could have been cleared up by looking at the quotation, but the insurer failed to investigate the discrepancy. While one may have expected the complainant to point out that there may be something wrong as he was receiving a higher income than on the quotations and applications, in our view it could certainly have been expected of the insurer to investigate the reason for the discrepant figures.
6. The insurer insisted that the quotations did not form part of the legal contract with it. The welcome letter sent to the complainant referred, however, to his plan summary and terms and conditions, and thereafter stated that “These documents are important legal documents and together with your application form and quote, they form your contract with the insurer”.
7. We also noted that attached to the complaint was an email from the insurer to the financial adviser in which it was stated that the insurer had “since the latter part of 2009, started to compare the app with the quote, if present, and to defer should be there be huge discrepancies”. The insurer thus obviously acknowledged that it was good practice to compare the application with the quotation.
8. We pointed out that the annuity policies contained a non-variation clause stating that “no alteration or variation of this Plan shall be of any force or effect unless it is recorded in writing and signed by both the Contracting Party and an authorised Senior Manager of [the insurer]”. It was therefore contemplated that there might be variation of the plan, under the stipulated conditions. We asked the insurer, given the circumstances of this matter, why it could not change the annuity policies, with the necessary adjustments to take account of income already paid in order to give the complainant what he had wanted from the outset.
9. The insurer agreed to change the annuity contracts to joint life annuities from inception. Its actuarial department calculated that the complainant had received some R16 000 additional income. He could repay this as a lump sum, or he could sign a garnishee order for the insurer to deduct R500 per month from his annuities. He elected the latter, and the annuities were changed.