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CR232 Payment – insurer setting-off overpaid amount against other policy benefits

CR232

Payment – insurer setting-off overpaid amount against other policy benefits

1. The complainant invested an amount of R100 000 in March 1993 with an insurer in a so-called back-to-back policy. R72 000 was used to purchase a ten year temporary annuity providing the complainant with a monthly income of R1 100,00, the balance was used to purchase a nine year temporary annuity funding an annual premium on the ten year endowment policy.

2. In 1997 a partial withdrawal of R30 000 was taken.

3. In September 1998 the policyholder took a loan of R7 000.

4. The complainant’s income was not paid in November 1998 and she phoned the insurer. Her attorney also queried the non-payment.

5. The insurer explained in a letter to the client that due to an error on their part the income annuity had been duplicated and consequently double payments had been made to her since inception. The overpayment amounted to R74 957. When the error was discovered further payment was frozen.

6. The insurer offered her two options: 1) that the excess be repaid or 2) that all the policies be surrendered and the surrender proceeds be set-off against the overpaid amounts. The balance would not be claimable.

7. The complainant asked for the entire debt to be written off. She did not choose either option. He request was refused and she was advised that no further income would be paid after March 1999.

8. The complainant wrote to us in 2006 that the endowment had not paid out. The insurer advised that the maturity value of the endowment would have amounted to R35 343 which would not cover the amount of the outstanding loan debt plus the balance of the overpaid income. They were prepared to write off this amount.

9. The complainant, however, again queried the right of the insurer to reclaim the overpaid amount. We found that in the circumstances the insurer was in law entitled to rely on the condictio indebiti to reclaim the overpaid amount. As far as the annuity was concerned the insurer in our view was futhermore entitled, once it realised in November 1998 that an overpayment had been made, to raise set-off as it did from March 1999 when it ceased making the annuity payments and set the annuity payments off against the earlier overpayment. This left an amount of R41 202 that remained due in respect of the overpayment. As the insurer’s right to claim this amount had arose in November 1998 it was in our view a prescribed claim. Therefore we were of the view that the insurer could not set-off this remaining amount against the endowment policy.

10. The insurer did not accept our provisional ruling but made an offer of R22 000 to the complainant which was accepted by the complainant. Accordingly it was not necessary for the office to make a final ruling in this case.

JP
May 2007

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