CR352 Equity Insurer relying on two year suicide exclusion clause on replacement policy
Insurer relying on two year suicide exclusion clause on replacement policy; replaced policies in place with same insurer for 13-21 years; no interruption in cover
1. The insured had had continuous life cover with the insurer over a period of 21 years, under three policies commencing in 1990, 1997 and 1998, respectively. The total sum assured was nearly R6 million.
2. On 28 March 2011 he applied for a replacement policy for these three policies, which were then terminated. The new policy commenced on 1 May 2011. The sum assured was R1 million. In the Replacement Policy Advice Record (RPAR) the insured gave his reason for the replacement: “By changing to a new generation product, the rates for cover are greatly reduced”.
3. Almost a year later the insured committed suicide, on 31 March 2012. His son instituted a death claim, which the insurer repudiated, relying on the standard two year suicide exclusion clause on the policy.
4. The son lodged a complaint with our office, arguing that the recalculation of a two year suicide limitation for a replacement policy from date of replacement was not based on reasonable risk assessment, and was not industry standard. He provided an example of a document from another insurer, indicating that that insurer would recognise the period of life cover under a replaced policy in applying the suicide clause, as long as the cover was uninterrupted. The insurer in this case however was not prepared to deviate from its decision.
5. The matter was discussed at a meeting of adjudicative staff. The meeting decided that we should make enquiries with the industry body ASISA (Association for Savings and Investment South Africa) as to the general practice in the industry with regard to internal replacements.
6. The response from ASISA stated that it did not prescribe any rules or requirements in this regard. ASISA took up our enquiry by “engaging with a few of its members”, and indicated that most insurers did not apply a “rule of continuous risk”, so for these insurers all exclusions would apply on new/replacing policies. However some member insurers advised it that no general rule applies and they looked at the merits of each case individually.
7. We met with the insurer and pointed out that in this case the insured had had uninterrupted life cover for 21 years, and that the risk to the insurer was considerably reduced (from almost R6 million to R1 million) when he replaced his three earlier policies with one policy in May 2011. In these circumstances we recommended that the insurer pay the claim on grounds of equity.
8. The insurer agreed to pay the claim on an ex gratia basis.